How would moving to renewables save us money on fuel bills?
Figures seen by Sky News show that the cost of producing energy from wind will be less than half the cost from gas this year, and could fall to a quarter in 2023.
The government has announced its long-awaited energy security strategy today, and has set out plans for how the UK will produce more of its own energy.
There are environmental benefits to this, but the aim is also to reduce reliance on Russian oil and gas and help tackle soaring energy prices.
After the price of a standard bill rose by more than 50% last week, pushing more than a quarter of households in England into fuel poverty, the fact that wind is cheaper than gas is more important than ever.
Rising fuel costs, as well as technological advancements in the wind sector, meant that it became cheaper to produce a unit of energy from a wind farm than a gas-fired power station for the first time in 2021.
The way of measuring how expensive it is to produce energy from different sources takes into account all of the different costs involved over the lifetime of a plant – the build, the fuel and the maintenance – and how much energy it can provide over that time.
Energy from new onshore wind-farms is less than half the price of energy from gas stations that are already built and running. With offshore wind it’s less than two-thirds of the price, according to researchers at BloombergNEF.
The researchers expect the price of gas to drop slightly next year, so it will be a similar cost to offshore wind again, before rising again through the rest of the decade while wind continues to fall. Gas will remain more expensive than onshore wind throughout.
Other energy analysts, at consultancy firm LCP, say they think the price of wind energy will drop to about a quarter of the price of gas energy in 2023.
How much wind power do we use at the moment?
Wind is already the second biggest contributor of energy in the UK, having multiplied almost 20 times in the last 10 years.
While the environmental benefits of wind energy have been behind most of its rise so far, the political and economic factors are key to why plans are being accelerated now.
The prime minister told wind-industry leaders last week that his long-term strategy to reduce reliance on fossil fuels has become even more crucial since Russia’s illegal invasion of Ukraine.
Using less gas not only weans us away from a reliance on foreign fuel supplies, it also limits how much our energy bills are affected by the global prices of gas and oil.
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Why are bills still high?
At the moment it’s difficult to see how cheaper energy from wind is contributing to savings on our energy bills. This is partly to do with how the National Grid Electricity System Operator (ESO) balances the energy that we use.
The National Grid ESO has sophisticated models predicting how much energy the country will need for a given half hour period, based on habits we know about like when people cook or turn lights on, as well as how cold it is and how many people will have their heating on.
The ESO then brings on board energy, using the cheapest suppliers it can, to fulfil that need.
A National Grid ESO spokesperson said: “The rules of our license mean we must always bring on the cheapest form of electricity available, we are technology agnostic.
“Prices are market driven so we are not immune to global issues like the rise in the cost of wholesale gas. We have a diverse generation mix and as we bring on more renewable energy, with the technology to store that energy, we will become more energy independent.”
Can renewables replace UK gas demand?
Using the cheapest suppliers means they will typically start with renewable sources – wind, solar, tidal – and then move on to nuclear and the most efficient gas suppliers, before resorting to the most expensive gas and coal providers only if there is still demand left over.
Effectively, we pay for the total cost of that, balancing the cheapest sources of energy against the most expensive. The costs are paid by the industry but ultimately passed on to billpayers.
We are also still paying for energy from older wind farms at the more expensive rates they were built at, before technological advancements made it cheaper to build bigger and more efficient turbines that can provide more energy.
Dr Simon Evans, deputy editor and policy editor at climate change publication Climate Brief, says “renewables are taking the edge off bills a bit, because they are mitigating against us using the most expensive gas and coal”.
“They shaved the equivalent of about £10 off bills last winter, and would have saved about £100 if we’d already built the wind and solar farms that are under contract or expected to be granted contracts in the summer.
“But the wholesale price of gas is still most important in setting the price we pay – it has driven about 90% of the increase in bills.
“If we had more renewables they would be taking more of the edge off the higher bills.”
So despite the complicated payment method, there are minor improvements already being made to people’s bills thanks to renewable energy, with more significant ones to come in the future. That doesn’t answer the question of supply though.
Can we rely on renewable energy?
What happens when the wind isn’t blowing?
In previous years, the supply of energy was relatively predictable. The National Grid ESO can reliably predict how much energy a given gas or coal power station will produce per hour, and match that against how much energy they think we’ll need.
Now the UK is using more wind, supply is less predictable short-term.
Just as the country isn’t able to control the global price of gas and oil, it also doesn’t have much sway over the weather – how much the wind blows or how much the sun shines.
On 29 January this year, wind was responsible for its highest ever daily output of energy in the UK – 409,107MWhs. It was more than half of the total energy used in the UK that day.
On days like this, the grid is able to avoid buying from the most expensive providers, which pushes the overall costs of energy down.
But on 25 January, just four days prior to that record output, the wind wasn’t blowing as much and the grid was able to buy fewer than 100,000MWhs – a quarter of what it purchased on 29 January.
So it would have needed to reach out to some of the more expensive suppliers to meet the demand, pushing the overall costs up.
Orkney leads the way on renewable energy
The gas and coal suppliers that aren’t usually switched on will charge the highest rates, partly because it’s expensive to switch the stations on from cold and they have to be on for a certain amount of time, for safety reasons. But also because those selling the energy know that times are desperate and they can get away with asking for more.
A solution to this is being able to store energy created from wind and solar when more is being produced than can be used at the time.
The storage is typically either in batteries or in the form of hydrogen that can be extracted from water when the turbine is running, and stored to be burned when it’s needed later.
These storage options can be expensive – so transitioning to a renewable system which could cope with cold, calm, dark periods could still be costly even if the ‘fuel’ is free, but Dr Evans says such a system would still be cheaper overall.
“Because wind and solar are so very cheap, the overall costs are lower even when you pay for storage and for building the storage technology.
“The prices will fluctuate up and down more hour-by-hour than they do at the moment, but the average costs would still be lower than they are now.
“The way that consumers pay for and use energy at the moment means the hour-by-hour changes won’t be that noticeable – you’ll just see the overall price going down.
“But we may get to a stage where we can set smart chargers to charge your electric car only when the wind is blowing strongly, and can sell energy back to the grid when it’s not.”
The Data and Forensics team is a multi-skilled unit dedicated to providing transparent journalism from Sky News. We gather, analyse and visualise data to tell data-driven stories. We combine traditional reporting skills with advanced analysis of satellite images, social media and other open source information. Through multimedia storytelling we aim to better explain the world while also showing how our journalism is done.