UK wind capacity is expected to rise 50 percent, gradually cutting returns for operators of gas and coal plants over the next three years.
The rise in wind capacity is forecasted to rise to 8,500 megawatts by late 2012, around 13 percent of total installed capacity, according to green energy industry group RenewableUK.
Britain has 3,400 onshore and offshore wind turbines. The power produced from the wind turbines his a record high on September 6 thanks to hurricane Irene.
“Wind speeds have been pretty strong of late, which will increase wind power generation and hence push prices down in theory,” said Kamran Pervaze, energy market analyst at consultancy Wheldrake Energy.
The growth of the wind capacity may be hindered in the future by an aging power grid, which is limited in capacity. Investments will have to be made if the UK wishes to become a leader in green energy like Germany and Spain.
Germany currently has five times as much wind capacity installed. All their renewable energy produced is sold on the EEX exchange that results in negative power prices when there is strong wind speeds and low demand.
Traders will have more impact from UK wind power capacity when periods of high wind will leave the market with an oversupply.
The energy produced from the wind adds to the electricity supply and will effect short-term gas prices as the amount of gas needed to generate electricity for power plants will vary.
“Over time intermittent generation will change the structure of gas plant returns as they face reduced running hours and less certainty as to when they are likely to generate,” said Olly Spinks, director at consultancy Timera Energy.
The British government needs to make sure power stations can recover costs to prevent closing from lack of profits, which would pose a threat to the security of supply, added Spinks.
The government has submitted an electricity market reform proposal to parliament that would reward operators for holding spare capacity that can be switched on quickly in times of low renewable energy output.
However, this policy would not go into effect until around 2014. Thermal plant operators, in the mean time, face profit loss especially in times of high wind.
The aging transmission grid will pose the greatest problem for Britain’s wind power market.
“For a country with some of the best offshore wind resources in the world it’s pretty embarrassing by international standards,” said Pervaze about Britain’s grid infrastructure.
That’s all for now,