Government told: be ambitious to get offshore wind back on track

RenewableUK are calling on the government to make sure the price is right for the next round of auctions for renewable energy projects, to avoid the pitfalls of last September’s fifth round which attracted no bids for offshore wind at all.

In a new report, RenewableUK have identified that there are 14 wind farms already eligible to bid in round 6, which opens at the end of March, and more that might become eligible by then.

Between them, these wind farms have the potential to add 14.9GW of offshore wind capacity, slightly more than the 14.7GW that is currently  operational. This would go some way towards meeting the UK’s ambition of deploying up to 50GW by 2030, 

By way of illustration, that combined capacity would generate around 28% of the UK’s entire electricity needs and enough to power over a 28 million homes for a year.

Thanks to ORE Catapult for this simple explanation of how the system works:  CfDs are 15-year contracts that the government signs with energy generators to fix the price they get for the energy they generate. If the market price of energy is lower than the “strike price” the generator is paid the difference, if it is higher the generator pays back the difference. The money for this subsidy comes from the Green Energy Levy on consumer bills.

No bids were submitted during the last round because the government had underappreciated how inflation had hit the industry, with the costs of deploying turbines estimated to have risen by around 40%, for a variety of reasons.

As such the strike price of £44/MWh was never going to a sufficiently large step up from the round 4 price, leading to no bids.

Aiming to rectify this for 2024, the maximum strike price for offshore projects has been increased by 66% to £73/MWh (and by 52% for floating offshore projects, from £116/MWh to £176/MWh)

RenewableUK’s Chief Executive Dan McGrail said: ‘Our latest EnergyPulse report highlights the enormous opportunity which the Government has to strengthen the UK’s energy security, with a record number of new offshore wind farms eligible to bid into this year’s clean power auction, and a record amount of new capacity.

‘As offshore wind farms are one of our cheapest sources of new power for billpayers, we’re urging Ministers to be ambitious when they set out the auction budget and parameters next month. If this is done in the right way, we can secure billions in private investment, driving the growth of the UK’s offshore wind supply chain and new jobs in the sector.

‘The report also shows that offshore wind is ramping up worldwide at an astonishing pace – and that despite fierce global competition, the UK continues to be a world leader in this vital technology. In this year’s auction, we have the potential to prove again that Britain is one of the best places to invest in new offshore wind projects.’