Breakdown of figures for future offshore wind and wholesale electricity prices: EIR release

Information requested

"Please provide the full details behind the calculation mentioned in this written answer given by Michael Matheson on 11th March 2022. This should include all relevant assumptions. eg on future wholesale electricity prices, future offshore wind prices, typical household consumption etc…

https://www.parliament.scot/chamber-and-committees/questions-and-answers/question?ref=S6W-06458"

Response

The full details behind the calculation mentioned in the written answer referred to in this EIR request are explained below. A list of sources is provided at the end of the answer.

Nuclear

Assuming a total capacity of 3260MW, a load factor of 90% and a CfD strike price of £92.5/MWh, it is estimated that Hinkley will receive £2,377,420,200 each year from its Contract for Difference (CfD) (2012 prices).

Future wholesale electricity price projections were sourced from UK government statistics. According to these statistics, the wholesale electricity price in 2030 is estimated to be 5.5 p/kWh, or £55.2/MWh (2019 prices). In 2012 prices, this price equates to £48.74/MWh. This price was converted to 2012 prices to allow for comparison with CfD figures.

Based on these assumptions, in 2030 the electricity provided by Hinkley at its CfD strike price of £92.5/MWh is estimated to be £1,124,688,962 more expensive than the equivalent amount of electricity provided at the projected wholesale electricity price of £48.74/MWh.

At the time of this calculation, the ONS estimated that there were 28,100,000 households in the UK. Dividing the £1,124,688,962 additional cost of Hinkley by the number of households in the UK leads to an estimate of £40 in additional cost for consumer bills. A simplified assumption was made that the number of households in UK is a reasonable proxy for the number of electricity consumers.

Offshore wind

Assuming a load factor of 50%, an offshore wind farm with a total capacity of 5868MW would be expected to produce an equivalent amount of electricity to that of Hinkley (with a total capacity of 3260MW and a load factor of 90%).

If this equivalent offshore wind received a CfD strike price of £39.65/MWh, then it would be expected to receive an annual CfD of £1,019,077,956 to provide the equivalent amount of electricity as Hinkley.

Using the same assumptions on projected wholesale electricity prices, the electricity provided by an equivalent offshore wind farm with a strike price of £39.65/MWh would be £233,653,282 less than the equivalent amount of electricity provided at the projected wholesale electricity price in 2030. Divided by the number of households in the UK in the same way as above, this leads to an estimated £8 in reduced cost for each household in 2030.

Sources:

• Hinkley strike price: Contracts for Difference - GOV.UK (www.gov.uk)
• Load factor of a nuclear plant: BEIS_Electricity_Generation_Cost_Report.pdf (publishing.service.gov.uk)
• Wholesale electricity price projections: Updated energy and emissions projections: 2019 - GOV.UK (www.gov.uk)
• Number of households in UK: Families and households in the UK - Office for National Statistics (ons.gov.uk)

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