Power from a long-delayed biomass power plant will cost almost three times as much as new wind and solar power and could ultimately drive up bills, a Telegraph analysis shows.
The MGT Teesside plant, due to start operating this year, will burn wood pellets to create enough electricity to power 600,000 homes. It was originally slated to open in 2018 and missed the go-live deadline last December.
The deadline has since been extended by the government-owned Low Carbon Contracts Company (LCCC) until the end of this year.
But the plant has been criticized as expensive and inefficient.
Once online, the plant will begin producing electricity at an agreed price of £147.45 per megawatt hour (Mwh).
Under an agreement with the government, renewable energy producers get an agreed price, which the government supplements when wholesale electricity prices fall. The deductible is in addition to the green levies included in consumer bills.
When electricity prices are higher than the agreed strike price, generators reimburse the difference to the government.
The price of the MGT Teesside power station is nearly three times the cost of new offshore wind projects, which have a cap in upcoming low-carbon energy auctions of £54 per Mwh.
“The government’s misguided largesse”
Lord Randall of Uxbridge, a Tory peer, said the biomass approach should be reconsidered.
“We need to rethink our approach to bioenergy,” he said. “It is expensive and the environmental benefits are questionable. It’s hard to justify these subsidies in a time of rising energy bills, especially when truly clean energy sources are significantly cheaper.
Phil MacDonald, CEO of think tank Ember, said: “This is a story of outdated technology limping along thanks to misguided government largesse.
“Biomass is an extremely expensive means of energy production. This money could have been spent on wind and solar, which are so cheap that they are now acting to reduce energy bills.
“The government is supporting a dead horse here, and energy bills will rise accordingly.”
With wholesale electricity prices at record highs due to the global cost of gas, the project is likely to repay the government.
But as prices fall back to more stable levels of around £50-60 per Mwh, Teesside power station could receive an annual subsidy of around £180-200m, or between £2.20-2.50 £ per household, according to an analysis by the Carbon Brief website for The Telegraph.
This contrasts with new wind and solar projects, which are expected to continue to receive zero or negative subsidies.