Obscene Profits from Offshore Wind Farms

Putting British Gas Profits in Context

Introduction

Last week, the Guardian suffered an attack of the vapours because British Gas had the temerity to make a profit. British Gas Energy made an operating profit of £751m in 2023. This sounds a lot, but according to their investor presentation (p17), they supply 7.5m customers, so that’s approximately £100 per household. It also turns out that last year’s profit was a catch up from the prior year as it received £500m in 2023 for costs incurred in delivering the price-cap in 2022, see Figure 1.

Figure 1 - British Gas Profits 2022 and 2023

Taking 2022 and 2023 together, they made £823m profit, or an average of £412m per year. That works out at less than £55 per customer per year.

If each customer uses an average amount of gas (11,500kWh) and electricity (2,700kWh) each year, then they made 0.7p/kWh profit in 2023 and an average of 0.4p/kWh across the two years. My electricity currently costs 27p/kWh and gas 6.8p/kWh, so their profits are a small part of the overall bill.

But if Guardian writers think the profits British Gas is making are excessive, what will they make of the profits of offshore windfarms?

Offshore Windfarm Generation and Operating Profits

I selected four offshore windfarms Beatrice, Sheringham Shoal, East Anglia One and Dudgeon and downloaded their latest accounts from Companies House. However, to get the full picture, we need to understand their electricity generation as well as their financials. Beatrice and East Anglia One declare their generation directly in their accounts. Scira Offshore (Sheringham Shoal) declare their CO₂ emissions and emissions per GWh of generation, so it is possible to calculate their output. Dudgeon does not declare its output directly, but it can be found in data from the Low Carbon Contract Company. In the latest available year, together they made an operating profit of £738m, or almost as much as British Gas (see Figure 2).

Figure 2 - Latest Operating Profits and Generation of Selected Offshore Windfarms

They “earned” these profits from generating distinctly intermittent power. We pay for these profits through our bills and we also pay for the backup generators that must be on standby for when the wind is not blowing. In addition, we have to pay even more for them to stop generating when the wind is blowing too hard and the grid cannot transmit all their output.

Their generation of 7,286GWh represents about 2.5% of total electricity supplied in 2022. £738m profit for generating only 2.5% of our electricity does not sound like a particularly good deal.

Offshore Wind Farm Revenue per MWh

They earn these profits because they are being paid obscene amounts of money for their output. Figure 3 shows the revenue per MWh generated for each of these wind farms.

Figure 3 - Revenue per MWh Generated for selected Offshore Wind Farms (£ per MWh)

The £260/MWh (26p/kWh) earned by Sheringham Shoal on the wholesale markets is almost as much as the current retail price. The red and green dotted lines are what the Government said offshore wind should cost in 2025, in today’s money.

Offshore Wind Farm Operating Profit per kWh

Now to put things on the same basis as British Gas profits. Remember British gas made about 0.4p/kWh operating profit on all the energy it sold over the past two years. Figure 4 shows what these windfarms have been making on the same basis.

Figure 4 - Operating Profit per kWh for Selected Offshore Wind Farms (p per kWh)

The wind farms are making 20-40 times more money per kWh generated than British Gas is making per kWh supplied.

If the Guardian wants to have conniptions about private companies making money, it could at least choose the right targets.

The research for this article has uncovered some other rather interesting facts that will soon be the subject of another article, where we will “follow the money”.

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