A guide to energy subsidies

Energy subsidies are a very complicated area. If don’t have time for all the details, here’s what you really, really need to know.

When comparing the (lack of) subsidies for onshore wind to subsidies for fossil fuel electricity we’re looking - mainly - at two things.

First, the exclusion of onshore wind from what are called ‘contracts for difference’ auctions. These are reverse auctions (seeking the lowest bid, not the highest) that renewable projects can bid into. The projects that win are guaranteed a price (called a ‘strike price’) for the electricity they will produce over 15 years. This guarantee provides the certainty that investors need to get stuff built. But onshore wind isn't in these auctions: it's being left out in the cold. That means almost no new onshore wind power.

Second, something called the ‘capacity market’. This isn’t really a market at all. It’s a mechanism for paying existing (conventional) power stations to stay open, and for encouraging new ones to be built. This is so there is enough generation capacity on the system that can be turned on and off, or up and down, when we need it to ensure security of supply. Thing is - most of the money allocated through the capacity market is directed towards fossil fuel plants. And it is lots of money - £2.8 billion has been awarded so far.

There are other subsidies that apply to small-scale wind, and there are other ways that fossil fuel generators are subsidised (ancillary services or balancing mechanism anyone?). But contracts for difference and the capacity market are by far the biggest, so we’ll stick to them.

It’s absolutely true that there will need to be capacity payments made to conventional power stations in the future - it’s a necessary part of the transition to a totally new kind of energy system (for now at least). But the way you do it matters - and we’re currently paying too much, without a proper long term plan. This is costly, obviously, and dangerous because it could mean we remain locked into fossil fuel generation for years to come. It also takes money away from investing in clean energy.

But even if we weren’t overpaying, it’s plainly unacceptable to be dedicating public money to gas, coal and diesel power stations simply to exist while denying any financial support whatsoever to onshore wind to actually produce clean electricity. Don’t forget - onshore wind is the cheapest form of low carbon we have - and fast approaching parity with new gas-fired power stations.

10:10 believes that dirty fossil fuel electricity generation should not be given more financial support than clean onshore wind power. Sign our petition if you agree. 

...and if you’re really into all this subsidy stuff, you can check out our blogpost here for more .

Photo: Tim Snell Creative Commons