The Energy and Climate Intelligence Unit (ECIU) has quantified the savings to electricity costs that wind power is delivering by offering lower day-ahead wholesale prices, which could roughly equal the support that wind farms receive from bills.

Wind power is increasingly edging gas power plants off the system and is helping to reduce the amount of time that gas power stations set the overall price of electricity on the wholesale market. Previous analysis had found gas setting the price of electricity almost all of the time, but this now appears to have fallen to around 85 per cent of the time, back in the range from before the pandemic and gas crisis.

A new analysis found wind power reduced the wholesale price of electricity by up to a quarter (25 per cent) in 2024, equivalent to around £25/MWh. This ‘hidden saving’ is the result of wind power diluting the link between power prices and gas prices, which are determined by volatile international markets and have a disproportionate impact on overall electricity costs due to marginal pricing on day-ahead markets.

Dr Simon Cran-McGreehin, head of analysis at ECIU, said: “Energy experts have long known that the invisible hand of the market would see renewables with no fuel costs reduce the overall cost of electricity by pushing gas power out of the market, and this was starkly highlighted in the gas crisis. People may not realise it, but their bills would be higher today without the increasing role that wind and solar farms running on free sunshine and wind are playing by reducing our dependence on gas power.”

Given renewables are already suppressing the wholesale price of electricity, this puts a different perspective on strike prices under the Contracts for Difference scheme through which the Government procures new large-scale wind and solar projects. Were it not for existing renewables displacing gas power plants, the wholesale price would be higher than the strike prices for solar and onshore wind, and close to that of offshore wind.

The results are relevant for the wider debate on the clean power transition, presenting a ‘hidden saving’ that can be considered alongside the costs associated with renewables. Future analysis could consider the net effects, and how these are likely to evolve as some costs fall in the near future and the savings on marginal prices grow as more renewables are deployed.

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