How Miliband can make renewables cheaper – but there is really no alternative to renewables

giving longer term contracts to renewable energy developers will make solar and wind schemes even cheaper

In a world where the costs of building all sorts of power plants are
increasing, the Government has a powerful card up its sleeve to keep down
the cost of new renewable energy projects. The Government is considering
extending the contract length under which new renewable energy projects
receive their fixed payments per MWh that is generated.

If contracts for
difference (CfDs) are issued to last for 20 years instead of 15 years, this
could reduce the price of power from the renewable projects by at least 10
per cent (according to my calculations). By offering lower annual returns
over a longer period, the projects can be delivered for a lower fixed price
per MWh that is generated. Such a cost reduction seems likely to offset any
temporary (Trump-induced) cost increases for renewables.

The ‘Trump
effect’ may have led Orsted to discontinue its massive 2.4 GW Hornsea 4
offshore wind project near East Anglia. However, some commentators such as
Jerome Guillet argue that Orsted should have planned better to avoid this
outcome. Other countries operating the CfD system for renewable energy
employ 20-year contracts, and it has always been a mystery to me why the UK
Treasury plumped for a 15 year period. This is an artificially short period
compared to the project lifetime of 25 or 30 years.

Hinkley C, by contrast,
was given a 35-year premium price contract. Meanwhile, the French
Government is pressing the UK Government to put more money into the
long-delayed construction of the Hinkley C power plant. This, it seems, is
part of the price for EDF agreeing to the construction of the successor
Sizewell C plant. This is even though Hinkley C was given a contract that
pays it over £130 per MWh in today’s prices.

That compares to the most
recent auctions of wind and solar PV, whose contracts are worth £71-£83
per MWh at 2025 prices. As I write this, there appears to be a standoff in
negotiations over the terms for Sizewell C between the British and French
governments.

Quite apart from the cost, the idea that nuclear power is
going to be delivered anytime soon is fanciful. The idea that so-called
small modular reactors are any sort of alternative to the big ones is
ridiculous. They are just more expensive still!

At the end of the day,
energy efficiency and renewables are the only real options. After all, over
90 per cent of the new generation being deployed in the world last year was
renewable, almost all of it being solar or wind. The reason this is
happening is that their costs are falling and they continue to fall.
Renewables are the present and future. We need more electricity to
electrify transport, heating, and much else. Sceptics may rail and sneer at
Miliband’s clean power programme. If it has any faults, it is because it
is too mainstream, wasting money and time on carbon capture and storage and
nuclear power.

Dave Toke’s Blog 8th May 2025 https://davidtoke.substack.com/p/how-milband-can-make-renewables-cheaper