Contracting for wind generation

David M Newbery

Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge

Abstract: The UK Government proposes offering long-term Feed-in-Tariffs (FiTs) to low-carbon generation to reduce risk and encourage new entrants. Their preference is for a Contract-for-Difference (CfD) or a premium FiT (pFiT) for all generation regardless of type. I argue that neither is suitable for on-shore wind, where a fixed FiT appears less risky. The estimated extra trading and balancing costs of a CfD for on-shore wind might be £70 million/yr by 2020, while the cost of the increased risk incurred by a pFiT might add another £180 m/yr. If similar savings were made to projected off-shore wind investments the savings might be three times as high.

Keywords: Wind power; long-term contracts; balancing costs (search for similar items in EconPapers)
JEL-codes: L14 L94 Q42 (search for similar items in EconPapers)
Date: 2011-07-21
New Economics Papers: this item is included in nep-ene
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Citations: View citations in EconPapers (10)

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Related works:
Journal Article: Contracting for Wind Generation (2012)
Working Paper: Contracting for wind generation (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:cam:camdae:1143

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