Are renewables the answer to rising energy costs? As reported by New Scientist, Jim Watson at University College London believes that, despite the green levies that have been increasing energy costs in recent years, they have an important role to play in avoiding future energy price shocks.
Under the Contracts for Difference scheme, which sees levies applied to incentivise the development of new wind farms, energy generators are paid a top up of the difference between wholesale power prices and a "strike price", which is the estimated cost of generating renewable energy. As the wholesale price rises above the strike price the difference flows back to the energy suppliers helping to reduce the cost to consumers.
We may not see these benefits immediately, as Josh Buckland at the consultancy Flint Global notes billpayers are still paying historical green levies. However, continued investment in renewables could help to protect consumers against future crises.
“It’s a significant milestone,” says Josh Buckland at the consultancy Flint Global. “Support for renewables has added material costs to bills for the last decade, but rapidly declining costs and rising fossil fuel prices now mean that for the first time they are actually bringing down the cost for our energy suppliers.”
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