Latest UK Renewables Auction Fails to Attract Offshore Wind Bids

September 8, 2023

Credit: Colin Ward/AdobeStock
Credit: Colin Ward/AdobeStock

Britain's latest subsidy auction for new renewable energy projects awarded no contracts for offshore wind projects, the results published on Friday showed, drawing criticism from opposition politicians and environmental campaigners.

In a 2022 auction, offshore wind projects were the main recipient of funding, with 7 gigawatts (GW) awarded.

Offshore wind power is a key technology for reaching Britain's decarbonization goals, with the government aiming to have 50 GW of offshore wind in operation by 2030, up from around 14 GW at present.

The absence of awards for both offshore and floating offshore wind was a result of the global rise in inflation and the impact on supply chains, which presented challenges for projects participating in this round, the Department for Energy Security and Net Zero said in a statement.

"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, remains firm," Energy and Climate Change Minister Graham Stuart said.

The contract-for-difference (CfD) scheme, which was launched in 2014, offers renewable power developers a guaranteed price for their electricity.

"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," renewable energy campaign group Britain Remade said in a statement.

The lack of new offshore wind capacity would result cost consumers 1 billion pounds a year, it added.

The government had offered 227 million pounds to spur renewable power projects, increasing the total amount available in August after project developers had warned more funding was needed to reflect higher costs.

However, it maintained a price cap for offshore wind bids of 44 pounds per megawatt hour (MWh), down from 46 pounds/MWh in the previous round.

The auction news was an "energy security disaster", Ed Miliband, the Shadow Energy Security and Net Zero Secretary for the opposition Labour party said in a statement.

"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," he added.

The cost of offshore wind projects has risen by some 40%, developers such Germany's RWE and Sweden's Vattenfall have said, with the latter pausing development of a project that was awarded a CfD in last year's round.

LESS CAPACITY

Awards across all renewable technologies totaled 3.7 gigawatts, down from 11 GW of projects getting contracts in last year's round.

Solar power projects took the top spot with 1.9 GW of capacity, followed by onshore wind with 1.8 GW, the document showed.

The strike price for solar settled at 47 pounds ($58.71) per megawatt hour (MWh) in 2012 prices, up from 45.99 pounds/MWh in the previous round, with the onshore wind price rising to 52.29 pounds/MWh from 42.47 pounds/MWh.

Bid prices for renewable energy CfDs are expressed in 2012 money, with inflation meaning actual prices are higher.

Britain has shifted allocations to annual auctions, instead of every two years, which offered project developers more frequent opportunities to participate and allowed the government to amend conditions more quickly if needed, the government statement said.

($1 = 0.8005 pounds)

(Reuters - Reporting by Nora Buli in Oslo; Editing by Sharon Singleton and Miral Fahmy)

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