England is the windiest country in Europe, therefore wind turbines are our favoured large-scale renewable energy source (solar PV in the domestic market). Because no fuel source is required, once installation and maintenance costs are repaid the resulting power is “free”. Carbon-fuelled electricity generators must increasingly compete with an opponent whose marginal cost of manufacture is close to zero. This threatens future profitability and consequently credit rating agencies and banks have begun to selectively downgrade carbon-heavy electricity suppliers. The knock-on effect will be to increase their borrowing costs and negatively impact their share price – in turn threatening their future profitability, and so on…
This would not be such an issue if we could dispense with conventional generation with impunity – however the wind doesn’t always blow and the UK still needs carbon-based generation on standby. Power stations are most economic when running at full capacity – keeping them idling on standby is expensive and undermines the benefits of the renewable capacity they support.
The downward price pressure caused by the ingress of “free” power causes a further problem –distribution. “Free” power becomes saleable only when distributed to the customer via cables, wires and sub-stations. In some areas of the UK this distribution network is at full capacity and financially attractive renewable energy projects are stymied by insufficient local infrastructure with which to export their output to the grid. Ironically, the damage might be self-limiting -without investment the grid will lack the capacity to accept additional renewable energy generation.
Further information concerning the progress of “green” generation in the EU can be found here.