UK Labour Party releases plans for massive renewable capacity expansion

04 October 2018 16:25 Source:ICIS

This story has originally been published for ICIS Power Perspective subscribers on  02 October at 16:27 CET.

On 27 September the UK Labour Party outlined plans to radically increase renewable output to 2030, based on the assumption that the party were to obtain office in 2019. ICIS modelling shows that the plans would significantly reduce UK wholesale prices and the anticipated level of imports through to 2030, but would require very large subsidies due to the impact on renewable capture prices.


  • An increase in renewable capacity:
    • Offshore wind – 52GW by 2030 (from 8GW currently)
    • Onshore wind – 30GW by 2030 (from 13GW currently)
    • Solar – 35GW by 2030 (from 13GW currently)
  • The renewable share of electricity demand to increase to 85% in 2030


  • Modelling assumptions
    • We used the Labour Party’s forecasts for offshore wind, offshore wind and solar capacity through to 2030 for the Labour scenario below
    • All other technology types remained unchanged from our base case assumptions as the Labour Party did not announce any other specific capacity targets
    • Our Horizon model generates prices in €/MWh, so all prices were converted to £/MWh at an exchange rate of 1.12

  • Price impact
    • The dramatic increase in renewable capacity compared to the base case assumptions would have a bearish impact on power prices throughout the 2020s
    • By 2030, modelling suggests that the annual average price would fall to £37.0/MWh, which is £21.5/MWh below the base case

    • As a result, the UK would be transformed from the highest cost wholesale market in Europe to among the lowest
    • The level of net imports would be just 14.4TWh in 2030, compared to a base case figure of 88.5TWh
    • Capture prices
      • Capture prices reflect the actual price that can be obtained by renewable producers from selling their power to the market
      • Since wind units have similar production profiles, and since times of high wind output tend to be associated with low prices, the capture price is below the overall market price
      • The difference between the market price and the capture price widens as more renewable units are brought online as it exacerbates this trend (‘price cannibalisation’)
      • For the offshore wind fleet taken as a whole, ICIS modelling suggests that capture prices will be £51.9/MWh in 2030 in the base case scenario, in real 2018 terms
      • For the Labour Party scenario, capture prices would fall to just £27.3/MWh in 2030 due to the significant increase in capacity
    • Subsidy levels
    • The lower capture prices would have a knock-on effect on the level of subsidy required to support projects as the current CfD system pays the difference between the agreed strike price and the price obtained by producers on the wholesale market
      • If the capture price rises above the strike price, the producer pays back to the Low Carbon Contracts Company
    • ICIS calculations suggest that at a theoretical average strike price of £60/MWh for all offshore wind capacity funded through the CfD*, the base case subsidy for offshore wind projects would be £2.5bn between 2020 and 2030
    • For the Labour Party scenario, the level of subsidy at the same assumed strike price would rise to £15.2bn due to the double impact of having more projects to support and far higher subsidy requirements per project due to lower capture prices
        • If the Labour Party's plans for onshore wind and solar expansion were also be funded through the CfD system, the same impact on capture prices and increased subsidy would be seen
      • Outlook
        • The Labour Party report provided no details on how it planned to achieve the renewable capacity targets, but stated that a full report will be published later in the year
        • The current Conservative government has faced pressure from industry to increase its offshore wind ambitions and reintroduce CfD contracts for solar and onshore wind projects. We expect the government to take decisions on these issues next year as part of the review of the CfD system
        • We believe there is potential for subsidy-neutral solar and wind projects in the UK in the 2020s given technology cost reductions and wholesale price expectations
        • While a much quicker expansion of renewables may be possible, this would likely require locking in very large subsidies for projects, as the bearish impact on capture prices would considerably lower the market-based revenues for project operators

       * Calculations exclude all existing capacity funded through the RO system and assume that the existing CfD model is used to support additional capacity

    Anise Ganbold is Senior Analyst - EU Carbon & Power Markets at ICIS. She can be reached at

    Matthew Jones is Senior Analyst - EU Carbon & Power Markets at ICIS. He can be reached at
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By Staff Reporter