Energy costs reduced £1.55bn in 2014 by renewables says new report

A new study shows that using wind and solar power reduced the wholesale cost of energy in 2014 and will reduce it even further in 2015

Bernadette Ballantyne
20 October 2015

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New research by renewable energy firm Good Energy shows that the use of wind and solar power reduced the wholesale cost of energy by £1.55bn in 2014 and says that this could be as high as £2bn in 2015. Installed capacity of wind and solar has increased from 16.1GW in 2014 to 21.9GW in 2015 meaning that costs could be brought down even further says the report.

The report follows government announcements that it plans to cut subsidies for wind and solar projects. In 2014 government subsidies through the renewables obligation certification scheme and the feed in tariff cost £2.67bn. However Good Energy says that the real cost is £1.12bn once the Merit Order Effect is taken into account.

"This analysis puts the bill payer at the centre of the debate around renewable energy subsidies. Let's give them the full picture and not just half of it,” said Juliet Davenport OBE, Chief Executive of Good Energy. "What is not taken into account is the fact that renewable energy, such as wind and solar, has actually been bringing the cost of energy down for consumers.”

"What is not taken into account is the fact that renewable energy, such as wind and solar, has actually been bringing the cost of energy down for consumers.”

Juliet Davenport, CEO, Good Energy

The report explains that at any moment in time the grid calls on generators in ascending order of marginal cost, known as the Merit Order. The cheapest options are called upon first meaning that the marginal cost of energy is reduced when renewables are online because they don’t use any fuel making their marginal cost zero (see chart).

In 2014 the installed capacity of wind was 12.1GW and this has increased to 13.7GW in 2015. For solar the installed capacity has doubled from 4.1GW in 2014 to 8.2GW in 2015.

Findings from the report have been backed by the University of Sheffield which is about to publish its own survey into the effect of onshore and offshore wind to wholesale energy costs. "At the moment the costs of renewable subsidy schemes such as Feed-in Tariff and Renewable Obligation have cast doubt over future of renewables. But there are very few reports of the actual financial savings from renewable generation like wind and existing savings to consumers," said Dr Lisa Clark, from the Department of Physics and Astronomy at the University of Sheffield.

“This report provides clear evidence that UK wind generation is typically saving UK consumers around £1.5 billion per year. This is more or less the same amount that the subsidies cost. At the University of Sheffield we have recently finished a similar study and we find very similar numbers. So not only is wind energy decarbonising our electricity generation, it isn't costing any more than any other source of electricity to do so."

The government consultation on the review of the Feed in Tariff for solar energy closes this week. The proposals are seeking to reduce subsidies by reducing tariffs leading to a phased closure of the system in 2018-2019. Giving evidence this week at the Energy and Climate Change Committee investigation into investor confidence in the UK energy industry, Minister of State at DECC, Andrea Leadsome MP told the committee that the consultation had so far had "very varied" responses. She said reducing subsidies was necessary to protect consumer bills and said that the take up of solar energy had met and exceeded expectations with 10-12GW currently under deployment compared to a forecast of 6-8MW. The UK was facing a "trilemma" of keeping the lights on, reducing bills and the need to decarbonise she said.