Wind farms to be paid at three times the market rate

Wind farms will receive generous subsidies for at least six years under a deal to give them three times the market rate for the electricity they produce.

The Government said onshore wind farms should earn at least £100 per megawatt-hour, double the market rate.

And in a deal described by City analysts as "astonishingly expensive", offshore wind farms will receive triple the market rate at £155 per megawatthour.

The market rate for electricity is currently less than £50 per mega-watt hour. The difference will be met by a subsidy from the taxpayer, which is potentially more generous than the current regime that hands developers more than £1billion a year.

Ed Davey, the Energy Secretary, said new costs were "broadly comparable" with prices this year.

However, his department said it had not worked out whether consumers would be paying more or less for wind power under the new system.

The subsidies will continue despite David Cameron's promise this month to "think very carefully" about green subsidies for energy sources such as wind farms and solar panels, as the extra costs "end up on consumer bills". It is likely to anger backbench Tories, after 100 MPs campaigned to stop the spread of onshore turbines blighting the countryside.

George Osborne ordered a 10 per cent reduction in subsidies for onshore wind farms last year.

Senior Conservatives had hinted that there would be more cuts to follow.

Developers have promised that they can reduce the cost of generating energy from wind substantially over the next few years to make it more affordable.

However, under the proposal, subsidies will be cut only slightly in 2017 by five per cent for onshore wind and 13 per cent for offshore wind.

Peter Atherton, an analyst at Liberum Capital, the European investment bank, said the charges of offshore wind turbines in particular look "astonishingly high".

"The costs are actually rising, rather than coming down as we'd been led to believe," he said.

The renewables industry said the level of subsidies would still mean it is "challenging" for them to make a profit. After the subsidies were disclosed, ministers announced new tax breaks for developers of shale gas.

The Government will offer towns and villages at least £100,000 for each well where fracking takes place and as much as one per cent of the revenues from the sale of the gas.

From The Daily Telegraph