The renewables industry has described the absence of new offshore wind projects in the latest government auction round as “a major setback”.
The UK’s renewable energy strategy has suffered a blow as no new offshore wind projects have been bought by developers at the latest Contracts for Difference (CfD) auction.
Industry experts had warned that this might be the case after ministers refused to increase the maximum price for the auction despite a 40 per cent increase in the cost of manufacturing and installing turbines.
The auction price led the three biggest offshore wind developers in the UK – SSE, ScottishPower and the Swedish company Vattenfall – to sit out the bidding. As a result, no energy companies submitted bids for offshore wind projects.
“This is a multibillion-pound lost opportunity to deliver low-cost energy for consumers and a wake-up call for government,” said Keith Anderson, chief executive of ScottishPower.
“We all want the same thing – to get more secure, low-cost green offshore wind built in our waters. ScottishPower is in the business of building wind farms and our track record is second to none in terms of getting projects over the line when others haven’t been able to. But the economics simply did not stand up this time around.”
Doug Parr, policy director at Greenpeace UK, called the situation a “monumental failure” and “the biggest disaster for clean energy in almost a decade”.
CFD auctions invites companies to bid to develop UK-based renewable energy projects. As part of the deal, projects receive a guaranteed price from the government for the electricity they will generate. This means that, if electricity prices in the future rise above that level, the companies pay the excess back to the Treasury. If prices fall below it, the Treasury pays the company the difference.
However, wind farm builders have complained that the latest price – set at £44 per megawatt hour – was too low and failed to take account the increase in costs.
The government said a “global rise” in inflation impacting supply chains had “presented challenges for projects”, stressing that the outcome of the auction was “in line with similar results in countries including Germany and Spain”.
The Department for Energy Security and Net Zero added that “significant numbers” of solar power, onshore wind, tidal energy schemes and, for the first time, geothermal projects, had been awarded funding. In total, 95 clean energy projects have secured £227m.
However, industry players have warned that the absence of new offshore wind projects could jeopardise the UK’s ambitions to triple its offshore wind power capacity by 2030.
Ed Miliband, Labour’s shadow energy security and net zero secretary, said the result of the auction was an “absolute disaster for Britain”, but was avoidable.
“They [the government] should be hanging their heads in shame,” he told the BBC’s Today programme.
This marks the first time since the launch of CfD in 2015 that no new offshore wind projects have been announced.
Last year, a study found that the UK would need to triple its current rate of wind turbine installation in order to meet renewable energy targets.
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