Renewables Save UK Consumers £1.5 Billion

A UK report published in October, “estimated that wind and solar reduced the wholesale cost of electricity by £1.55 billion (C$3.1 billion) [in 2014] … The value in 2015 is estimated at £2 billion.”

The UK has tripled the size of its renewable energy sector in five years, which now totals 28.4 GW. Renewables (wind, solar, hydro & other) were equal to 25% of UK electricity supply in Q2 2015.

“Solar, more so than any technology, has epitomised this dramatic growth… solar capacity in the UK has increased from just 96 MW in 2010 to over 8,200 MW.”

The report examined the impact of what is called the “Merit Order Effect”:

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Source: Wind & solar reducing consumer bills, goodenergy.co.uk, 2015

“Renewables positively impact electricity bills by reducing the wholesale price of electricity. … this has been quantified by various reports abroad and is a consequence of the Merit Order Effect (MOE). This describes the mechanism by which, at times of renewable generation, electricity from these sources will be cheaper than those from others (e.g., fossil fuel power stations) as renewable generators don’t have fuel costs.”

“As generating capacity needs to exceed demand, there are multiple combinations of generators that could be used to provide electricity. In order to reduce the cost of this electricity, it is logical to meet demand with the cheapest generators available at the time, i.e., those with the lowest marginal cost. A list of generators in ascending order of marginal cost is known as a Merit Order. Generators will be called upon according to the Merit Order to meet national demand.”

 

In Ontario, renewables account for a third (33%) of installed capacity, made up of 24% from hydro, 8% from wind, 1% from biofuel and less than 1% from solar. Nuclear generators account for 37% of capacity and gas-fired generators make up 29%.

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Source: Independent Electricity System Operator (IESO)

Solar capacity in Ontario is a meager 140 MW, not much more than where the UK was 5 years ago. It would seem that if we really want to reap the benefit of renewables, now is not the time to dial back government incentives for solar and wind energy projects. Practical experience elsewhere shows us that aggressive investment in renewables can return real and lasting benefits for consumers – even if its not immediately evident:

“Not all electricity is bought on wholesale markets, instead being contracted months or years in advance at a fixed price via mechanisms such as Power Purchase Agreements (PPAs). As such, it is not immediately obvious how savings in the wholesale price will be passed through to the end user. However, even the prices paid through long term contracts (e.g. PPAs) will be based to some extent upon the wholesale price of electricity. Whilst savings may not be passed through immediately, the reduced wholesale price will impact when these instruments re-contract.”

Download:
Wind & Solar Reducing Consumer Bills

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