By Paul Homewood
The new energy cap set by OFGEM last month, which takes effect from 1st July, is based on an average wholesale electricity price of about £150/MWh – OFGEM refuse to release the actual figure. As this is calculated from Feb to April prices, it is already out of date, so to speak.
According to Catalyst Energy, both spot and forward prices have fallen sharply since February, down to £68 and £109/MWh respectively in May:
This is confirmed by the CfD calculations for May, which give market prices for offshore wind of £80.16/MWh and £73.64/MWh for solar.
This of course means that we have now returned to the days of heavy subsidies for offshore wind power, which are earning an average strike price of £179.38/MWh, meaning that £90.1 million was paid out in subsidies last month.
We are even subsidising solar power, which earns £105.98/MWh in strike prices.
The drop in power prices is of course the direct result of lower gas prices.
This trend of lower prices is set to continue through the summer, so we can expect a much lower energy cap in October.