Latest UK Renewables Auction Fails to Attract Offshore Wind Bids
Posted 08/09/2023 13:38
The United Kingdom's most recent subsidy auction for new renewable energy projects ended without any contracts awarded for offshore wind initiatives, according to the results published on Friday. This outcome has drawn criticism from opposition politicians and environmental advocates.
In a 2022 auction, offshore wind projects were the primary recipients of funding, with 7 gigawatts (GW) of capacity being awarded. Offshore wind energy is crucial to the UK's decarbonization objectives, as the government has set a target of having 50 GW of offshore wind capacity operational by 2030, a substantial increase from the current 14 GW.
The absence of awards for both offshore and floating offshore wind projects in the latest auction has been attributed to global inflation and supply chain challenges, according to a statement from the Department for Energy Security and Net Zero.
While expressing the government's firm commitment to offshore wind expansion, Energy and Climate Change Minister Graham Stuart noted, "Offshore wind is central to our ambitions to decarbonize our electricity supply and our ambition to build 50GW of offshore wind capacity by 2030, including up to 5GW of floating wind."
The contract-for-difference (CfD) scheme, established in 2014, offers renewable energy developers a guaranteed electricity price.
Renewable energy campaign group Britain Remade criticized the auction's outcome, stating that "by capping the price the sector could bid at too low, government set it at a level that made it impossible for investors to meet their costs." They argued that the lack of new offshore wind capacity would cost consumers £1 billion annually.
The government had increased the total available funding to £227 million in August, responding to developers' requests for more funding due to rising costs. However, it maintained a price cap for offshore wind bids at £44 per megawatt hour (MWh), down from £46/MWh in the previous round.
The news of the auction's outcome prompted Ed Miliband, the Shadow Energy Security and Net Zero Secretary for the opposition Labour party, to call it an "energy security disaster," claiming that "the Conservatives have now trashed the industry that was meant to be the crown jewels of the British energy system - blocking the cheap, clean, homegrown power we need."
Developers such as Germany's RWE and Sweden's Vattenfall have reported a 40% increase in the cost of offshore wind projects, with Vattenfall even pausing the development of a previously awarded CfD project.
In total, the awarded capacity across all renewable technologies amounted to 3.7 GW, a notable decrease from the 11 GW of projects that secured contracts in the previous round. Solar power projects secured 1.9 GW of capacity, followed by onshore wind with 1.8 GW.
The strike price for solar settled at £47 ($58.71) per MWh in 2012 prices, up from £45.99/MWh in the previous round, while onshore wind prices rose to £52.29/MWh from £42.47/MWh.
It's worth noting that bid prices for renewable energy CfDs are expressed in 2012 money, and inflation means that actual prices are higher. The UK has shifted to annual auctions, offering more frequent opportunities for project developers to participate and allowing the government to make quicker adjustments to conditions if necessary, according to the government statement.