THE cost of building offshore wind farms has fallen massively, making the power they generate cheaper than nuclear.

The milestone is a huge boon to the renewables industry, and has be achieved far earlier than expected.

Aggressive bidding for a multimillion-pound pot of government subsidies means an offshore wind farm in the Moray Firth will be built for £57.50 per megawatt hour, about half the price of building a wind farm two years ago. The cost for the new nuclear power station at Hinkley Point is £92.50 per MWh.

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Spain’s EDP, the backer of the Moray East Offshore wind farm that is due to start generating power in 2022-23, was one of three firms to win the reverse auction for the lowest guaranteed price known as the “contract for difference” (CfD).

The lower the price, the more electricity-generating capacity can be built.

There was also good news for Grangemouth Renewable Energy Limited, which won subsidies to build a biomass plant by 2021-22.

It is estimated that the two projects together will generate enough electricity to power the equivalent of more than 1.1 million homes.

Analysis by conservation charity WWF suggests that on August 19 alone, output from turbines generated enough electricity to power nearly five million homes, or 158 per cent of Scotland’s total electricity demand.

Scottish Renewables deputy chief executive Jenny Hogan said: “The results of this latest auction are good news for Scotland, for our environment and for our energy system.

“The cost reductions seen in offshore wind in particular have been dramatic and are testament to the determination of developers to drive down costs. The scale of innovation taking place across the sector and its growing supply chain show the importance of ensuring a viable, competitive route to market is available for clean power technologies.”

She added: “However, onshore wind and solar are currently excluded from competing in contract-for-difference auctions. The government has the tools to drive down costs even further and these technologies can and should be allowed to play their role in delivering the government’s own industrial strategy.”

The government had allocated £240 million a year for the subsidies but the competitive prices mean it now expects them to hit £176m a year at most.

UK Energy Minister Richard Harrington said: “The offshore wind sector alone will invest £17.5 billion in the UK up to 2021 and thousands of new jobs in British businesses will be created by the projects announced today.”

Lawrence Slade, the chief executive of Energy UK, which represents the big energy companies, said: “Today’s exceptionally low results are further evidence of how the cost of clean energy is continuing to fall.”

The SNP said the Tories’ “wrong-headed” energy policy had been shown up. MSP Gillian Martin said: “This is excellent news for Scotland’s flourishing and world-leading renewables sector – and shows how misguided the Tories are on energy policy.

“The price of offshore wind energy has been falling for years – yet the Tories insisted on pushing ahead with their expensive white elephant project at Hinkley Point.

“Renewable energy is the future – offering sustainable jobs, economic growth and helping us tackle climate change and meet our environmental targets. The Tory obsession with nuclear power is frankly bizarre.”

WWF Scotland’s acting head of policy Gina Hanrahan said: “Renewables are working, creating jobs and investment and cutting carbon and thanks to clear policy ambition we are now a leading global player.”