UK’s latest renewables auction yields zero offshore wind bids

The UK’s Department for Energy Security and Net Zero has published the results of the latest renewables auction, which show no new contracts for offshore wind.

This was the fifth round of auctions which were launched in 2014 under the Contracts for Difference scheme.

This year, half of this year’s total capacity was secured by new solar projects, while onshore wind projects have delivered almost 1.5GW of capacity. However, offshore wind was noticeably absent from the results, a significant turnaround from last year’s results which saw commitments of over 11GW.

And it’s all down to economics.

According to a statement released by the UK government, the results are “in line with similar results in countries including Germany and Spain” and have resulted from the global rise in inflation and the impact on supply chain bottlenecks.

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The BBC has reported that energy firms SSE and Vattenfall ruled themselves out of the bidding, citing government failure to allow for sharp rises in the cost of steel and labour when setting the electricity price.

Alarm bells for UK offshore wind

Offshore wind plays a significant role in the UK’s net zero goals. The government has committed to securing 50GW of offshore wind capacity and 5GW of floating offshore wind by 2030, however, the latest auction results do not bode well for meeting these targets.

The lack of sensible strike prices (the fixed price paid for energy under guaranteed contracts offered under the auction scheme) has also been blamed for this year’s results.

The strike price is designed to guarantee a rate for power by paying the difference when the wholesale price drops. The industry has called for a rise in strike prices in line with inflation, however, the government has not answered this request, with the price ceiling for offshore wind reportedly still lower than the price offered for gas-fired power plants.

Jess Ralston, energy analyst at the Energy and Climate Intelligence Unit (ECIU) said: “We’ve potentially missed out on bill savings worth over £1bn from no offshore wind bids, which again would be far cheaper than the alternative gas. That’s bad news for households, the industry and the Government – not a good look for outdated Treasury rules to be blocking cheaper bills ahead of the next Election.

“The industry says our offshore wind market, the second largest in the world, is ready to deliver. Will the government rerun this auction with sensible strike prices?”

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Energy UK’s chief executive, Emma Pinchbeck suggests these auction results put the UK’s 2030 targets in jeapardy. “As that target shows, offshore wind should be making a huge contribution to ensuring cheaper, cleaner energy for our country and bolstering our energy security by reducing our reliance on costly fossil fuels. While the support for solar and onshore is welcome, it doesn’t compensate for the lack of offshore wind.

“Failing to invest properly risks blowing a hole in our ambitions for providing cheaper, domestic energy and puts the UK in danger of going from leader to loser in offshore wind.

“Despite warnings that costs for offshore developers had increased by as much as 40% since the last auction, amidst growing global competition for investment, the Government pressed ahead with terms that were actually inferior to last year’s. CfDs have been a huge factor behind the expansion of new clean energy sources while driving down costs. However they have done that by providing the right level of certainty to developers making huge long-term investment commitments while ensuring their returns are linked to energy prices – and that’s what’s been missing here.

“The Government must learn the lesson quickly that failing to invest properly in our own clean energy sources will cost us dearly…

“Offshore windfarms take a long time to become operational, and only happen through commitments made years earlier – so we are already playing catch-up on the 2030 target.”

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