Will Morris (Friends of The Scotsman, 3 July) suggests Ofgem’s energy market indicator is a hypothetical snapshot in time and that judgment on profits should be made over a longer period. In the case of wind-generated electricity, longer view estimates can be made.
The 38MW Longpark wind farm development, for example, cost £33 million, according to the BBC. (It is owned by EDF, but SSE’s costs and returns will be very similar.)
Its historic load factor of 29.6 per cent would result in an annual output of 98 GWh. This realises around £4.9m from electricity generation and around £4.4m from Renewable Obligation Certificates (ROCs) making a total annual income of approximately £9.3m.
Depreciating capital costs over 25 years gives £1.32m per year and estimating an interest of 5 per cent (SSE might well pay less) gives costs of £1.65m per year. Other works costs (salaries, maintenance etc) would account for around £1.14m per year bringing total annual outgoings to around £4.11m.
The profit, for each year over the long time scale of 25 years, is thus around £5m yielding 15 per cent per year on investment. Not bad at all for the company as a one year snapshot, and outstanding to be guaranteed for 25 years.
However, it is we the consumers who pay for this profit. And that’s not all – electricity consumers would further have to pay system integration and infrastructure costs to cover additional transmission capacity, backup generation capacity and standby “spinning reserve” estimated to be around £162,000 annually per installed megawatt (ie £6m per year for Longpark), bringing the total extra cost to consumers of nearly £11m a year.
A good deal for the company – a very poor deal for the consumers.
(Dr) Bruce Hobbs
(Prof) Jack Ponton
Scientific Alliance Scotland
North David Street