World's biggest offshore wind farm to add £5.6 billion to energy bills over 15 years.

The National Audit Office underestimate the cost of offshore wind projects for Britain by 29%.

Hornsea Project One wind farm will see 174 turbines - each taller than the Gherkin - built 75 miles off the coast of Grimsby, spanning an area five times the size of Hull. The 3 phases of the project will build 1200 MW of wind power. Each turbine will be 6.9 GWe. Dong Energy, majority-owned by the Danish state, will build the wind farm and be paid a contract for difference of £140 per megawatt hour (2012 prices). This increases in line with the consumer prices index (CPI). The wind farm will be finished until 2019, and operational by 2020. The contract for difference lasts 15 years. This contract was awarded in 2014, without competition, by former energy secretary Ed Davey in 2014. Since then we've seen competitive offshore wind contracts awards can be as low as £115/MWh

Historically, offshore capacity utilization around Britain has been 33%. These turbines are taller. We should be generous and assume they will harvest wind at a rate of about 35%. That makes the effective capacity of this installation about 420 MWe.

With a wholesale market price of, say £45/MWh, and guaranteed price of £147.1/MWh, we now calculate the subsidy. (147.1 - 45) × 1200 × 0.35 × 24 × 365¼ = £376 million/year. Over a 15 year life that makes a £5,639 billion taxpayer subsidy. For the wholesale price of British electricity. £35/MWh is the minimum, £55/MWh a maximum, and £45/MWh an average.

	CPI	strike price (£/MWh)
Jan-2012		140
Jan-2013	2.7%	143.8
Jan-2014	1.9%	146.5
Jan-2015	0.3%	147.0
Jan-2016	0.1%	147.1

DECC did their calculations with 2013-14 prices which they think are £144/MWh. I'm not seeing that. Looks more like £145/MWh. Redoing my calculation as (145 - 45) × 1200 × 0.35 × 24 × 365¼ = £368 million/year. £5.523 billion over 15 years. The National Audit Office, NAO, numbers add up to £4.2 billion over 15 years. I calculate the cost at 31.5% more than the NAO.

The table compares my prices with DECC's prices. In the table below I assume DECC 2013/14 strike prices (as shown in the table). My calculations show offshore wind projects to be 29% more expensive than DECC/NAO numbers. DECC/NAO offshore wind total = £11.7 bn; Mine = £15.11 bn.

Table data : page 14 of Early contracts for renewable electricity

The Department awarded contracts to eight projects, commissioning from 2015 to 2019

Projects	Technology	Target commissioning date	Contract term or fixed end date	Capacity developer aims to install (MWe)	Strike price (£/MWh, 2012 prices)	Strike price (£/MWh, 2013-14 prices)	DECC	My
							cost of support (£bn, 2013-14 prices)
Teesside Renewable Energy Project	Biomass combined heat and power	31/07/2018	15 years	299	125	129	1.9	1.9
Drax 3rd Conversion Unit (Unit #1)	Biomass conversion	01/02/2016	2027	645	105	108	1.7	1.7
Lynemouth Power Station	Biomass conversion	31/12/2015	2027	420	105	108	1.1	1.1
Beatrice Offshore Wind Farm – Phase 1	Offshore wind	31/03/2018	15 years	280	140	144	1.0	1.28
Beatrice Offshore Wind Farm – Phase 2	Offshore wind	31/03/2019	15 years	384	140	144	1.3	1.75
Burbo Bank Extension Offshore Wind Farm	Offshore wind	31/03/2017	15 years	258	150	154	1.0	1.29
Dudgeon Offshore Wind Farm – Phase 1	Offshore wind	01/03/2017	15 years	90	150	154	0.4	0.45
Dudgeon Offshore Wind Farm – Phase 2	Offshore wind	01/08/2017	15 years	210	150	154	0.8	1.05
Dudgeon Offshore Wind Farm – Phase 3	Offshore wind	01/10/2017	15 years	102	150	154	0.4	0.51
Hornsea 1st GW Offshore Wind Farm – Phase 1	Offshore wind	31/03/2019	15 years	400	140	144	1.4	1.82
Hornsea 1st GW Offshore Wind Farm – Phase 2	Offshore wind	31/03/2020	15 years	400	140	144	1.4	1.82
Hornsea 1st GW Offshore Wind Farm - Phase 3	Offshore wind	31/03/2021	15 years	400	140	144	1.4	1.82
Walney Extension Offshore Wind Farm – Phase 1	Offshore wind	31/03/2017	15 years	330	150	154	1.3	1.66
Walney Extension Offshore Wind Farm – Phase 2	Offshore wind	31/03/2018	15 years	330	150	154	1.3	1.66
Total				4,548			16.6	19.81