- No Offshore Wind Projects Acquired in Government Auction
- Renewable Energy Developers Cite Low Electricity Price for Offshore Wind
- Blow to UK’s 2030 Offshore Wind Target Amid Rising Costs
Developers failed to buy new offshore wind projects at a major government auction, hurting the UK’s renewable energy agenda.
There were no proposals for new offshore wind farms, but solar, tidal, and onshore wind projects were secured.
Firms argued that the set price for generated electricity was too low to make offshore wind projects profitable.
According to the government, a “global rise” in inflation affecting supply chains has “posed challenges for projects.”
It was stated that while offshore and floating offshore wind projects were not included on the list of approved deals, the outcome was “consistent with similar outcomes in countries such as Germany and Spain.”
The Department for Energy Security and Net Zero stated that a “significant number” of solar power, onshore wind, tidal energy, and, for the first time, geothermal energy initiatives, which use heat from the earth to generate electricity, had received funding.
However, the lack of offshore wind will undermine the ambition to achieve 50 GW by 2030, up from 14GW currently.
Renewable energy groups say solar can’t create as much power as offshore wind.
The technology has been dubbed the “jewel in the renewable energy crown” of the United Kingdom. But firms have been hit with higher costs for constructing offshore farms. As materials such as steel and labor have increased in price.
According to government figures, the UK leads offshore wind and has four of the world’s largest wind farms. Which employ tens of thousands and provided 13.8% of the country’s electricity last year.
The government’s yearly auction solicits bids for renewable energy projects and UK grid electricity supply. The scheme guarantees a government-guaranteed price for electricity generated by projects to attract investment.
The agreement, known as a Contract for Difference (CFD), stipulates that if electricity prices exceed the set price, the companies will pay the excess back to energy suppliers, thereby reducing monthly bills. If prices fall below the guaranteed price, suppliers and consumers pay the difference to the company.
Latest estimates suggest offshore wind might have generated five gigawatts, enough to power five million households. However, wind farm developers had warned for months that the government was ignoring how much their development costs had risen.
Industry insiders said the new auction’s £44 per megawatt-hour price restriction ignored increasing costs.
“Missed opportunity”
Scottish Power’s chief executive officer, Keith Anderson, described the outcome of the auction. As a “multi-billion-pound missed opportunity to provide consumers with low-cost energy and a wake-up call for the government.”
The contracts were “recognized globally as a linchpin of the United Kingdom’s offshore success,” he said. But “the economics simply did not hold up this time.”
He added, “We need to get back on track and consider how to unlock billions of investment in what is still one of the cheapest ways to generate electricity and meet the UK’s long-term offshore wind ambitions.”
Alistair Phillips-Davies, chief executive officer of SSE, which is presently constructing the world’s largest offshore wind farm, stated that offshore wind power was a significantly less expensive energy source than other sources, including fossil fuels.
The UK needed additional wind farms, but “prices for this particular auction were set too low” to justify the expenditure.
Wholesale petrol prices in the UK rose by 10% on Friday after strike action at two major Australian LNG facilities.
Ed Miliband, the shadow secretary for energy security and net zero under the Labour Party, described the outcome of the auction as an “absolute disaster for Britain” that could have been avoided. He argued that the industry had warned the government that “unless they adjusted the auction price, this would occur.”
“They [the government] should be hanging their heads in shame,” he said.
While there were no offshore bids for contracts, a total of 95 renewable energy projects secured £227m in funding, up from 93 in the previous auction, securing “enough to power the equivalent of two million homes”
Graham Stuart, the Minister of Energy and Climate Change, stated that the government was “delighted” that the auction “saw a record number of successful projects across solar, onshore wind, tidal power, and, for the first time, geothermal power.”
He added that offshore wind was “central to our ambitions to decarbonize our electricity supply” and that the government would “work with industry to maintain our global leadership in this essential technology.”
