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It's been clear for quite a number of years that renewables in Europe no longer need any sort of government support. In any case, most of these support contrac
by derriz 2y ago
It's been clear for quite a number of years that renewables in Europe no longer need any sort of government support.
In any case, most of these support contracts have a "contract for difference" structure with a price established by competitive auction. In the early years, the prices were high as there were fewer bidders and large (unjustified) profits were made. But as time has gone on, increasing competition has pushed the prices lower and lower. On a net project-lifetime basis, it's probably now a wash whether you operate a wind farm under a CFD regime/contract or you just compete in the regular market. CFDs require you to reimburse the state when you get paid more than the strike price and so many (particularly wind) producers in the west/north of Europe were hit with large rebate bills in 2022 and 2023 as wholesale prices often exceeded the strike prices after the energy crisis caused by Russia's attack on Ukraine.
At least in the UK and Ireland, some renewable energy companies are opting out of the renewables-subsidy scheme completely. For example, the owners/promotors of the large Oriel off-shore wind project in Ireland are skipping all the bureaucracy and delays associated with the renewable auction process and will build the wind farm to compete directly in the day-ahead wholesale markets.
Of course there is a large benefit to being protected from the volatility of wholesale electricity markets but it seems like we've passed the point where the financial value of such a contract is required to make a renewables project viable.