Linking offshore wind farms to grid will cost £17bn

Fears that development costs could lead to higher prices for consumers

Plans to link offshore wind farms to the grid may result in higher electricity prices for consumers, it has been warned by a committee of MPs.

The method of bringing power from offshore wind farms, and onshore ones, to land is very complex and has been a major obstacle in the development and expansion of the wind energy industry, as a heavy-duty transmission infrastructure has to be developed, which has left many wind farms waiting for long periods to be connected to the grid.

Currently, a licensing system is in place which allows transmission lines to be constructed by the National Grid and other developers, who are then given a guaranteed income for 20 years; a total cost of £17bn. However, companies can only be fined 10% of their income if they fail to meet obligations, which Margaret Hodge, the chair of the public accounts committee, fears will lead to higher prices for consumers. She said, ‘Not only is it unlikely that this licensing system for bringing electricity from offshore wind farms on to the national grid will deliver any savings for consumers, it could well lead to higher prices. Indeed the terms of the licences appear to have been designed almost entirely to attract investors at the expense of securing a good deal for consumers’.

Offshore wind farms seem to be a good source of energy, but getting to use this energy is costly

(Image source - The Guardian)

Ofgem, the energy regulator, responded to the MPs report by highlighting the fact that it was only able to cover the first four tenders for licences, and added that the competition for these licences had saved customers about £290m. They said: ‘Our objective is to ensure this necessary investment is delivered at a fair price. As with any new market, there are lessons from early transactions. The initial tenders were conducted under interim arrangements. "It has always been Ofgem's intent to refine the tender process to deliver greater efficiencies and further benefits to consumers’.

As has been said before, new forms of energy production will, in the short term, lead to higher bills to cover the costs of implementing these new initiatives, though it is expected that these renewable forms of energy production will lead to cheaper bills in the future. But what do you think? Are you willing to pay more now for cheaper bills later? Let us know your views in the comments below.