The latest government auction of clean power contracts failed to attract any bids for new offshore wind farms, it was announced today (8 September). Overall, 3.7GW of new renewable capacity was secured – the lowest level since 2017, and just over a third of the 10.8GW in last year’s auction.
The renewables auction is an annual process in which the government attempts to incentivise private sector investment in renewable energy projects by offering financial support contracts known as ‘Contracts for Difference" (CfDs). Developers are offered a guaranteed maximum price for energy generated, called a strike price.
In this auction round for clean power contracts, up to 5GW of offshore wind was eligible to compete. That could have powered nearly 8m homes a year, trade organisation RenewableUK said, and saved consumers £2bn a year compared to the cost of electricity from gas. Offshore wind projects did not bid into the auction as a result of the maximum price being set too low however, the organisation said.
In Wales, RenewableUK Cymru said it was “incredibly disappointed” that there was no success for floating offshore wind, including Erebus, Wales’ first planned floating wind farm off Pembrokeshire.
The flagship 100MW test and demonstration wind farm, due to be commissioned in 2026, “was the leading opportunity for Wales to kick start a burgeoning industry,” the body said. Plans include 14MW turbines on floating platforms 40km off the coast, which could generate enough clean energy to power 93,000 homes.
Only 80MW of floating offshore wind is in operation in the UK today, so Erebus would more than double capacity.
The project has already secured a seabed lease and the necessary environmental and statutory consents, so a successful auction contract was the “final hurdle”, the organisation said.
“As Wales’ first floating offshore wind project, Erebus is entirely dependent on this form of revenue support to succeed, and the success of Erebus is critically important not only to Wales and the wider South West region, but also for the UK government’s own floating offshore wind targets,” said RenewableUK Cymru director Jess Hooper.
“This result will now delay investment decisions for developers, supply chain companies, ports and infrastructure, all with knock-on effects.”
Overall, only 27GW of the government’s 50GW offshore wind target for 2030 has been secured. Future auctions will now have to support 4.5-5.8GW a year to get back on target, RenewableUK said.
Industry has previously warned that auction prices needed to rise to reflect the impacts of the invasion of Ukraine, inflation in key commodities like steel, and increased financing costs from spiralling interest rates. Offshore wind developers saw the maximum price they could bid in this year’s auction cut by £2 to £44 per megawatt hour (MWh), however.
RenewableUK called for urgent action from the government to fix the investment framework through a package of reforms to CfD, support for supply chains, and fiscal measures to attract clean energy investment into the UK in the face of global competition.
CEO Dan McGrail said: “If the UK isn’t offering prices that allow investors to make a return, they will simply invest elsewhere. These results should set alarm bells ringing in government, as the UK’s energy security and net zero goals can only be met if we have offshore wind as the backbone of our future energy system. We need the government to show that the UK is open for business.
“The failure to secure any new offshore wind is a major blow for consumers that could, and should, have been averted. Building wind farms means we stabilise the cost of energy for the long term and reduce our dependency on fossil fuels, prices of which can be manipulated by dictators and despots. It’s not too late to get back on track, but without urgent changes, we risk pricing ourselves out of the global race for clean energy investment.
“Renewables don’t only enable us to fight climate change, they also help to drive economic growth, creating jobs and supporting supply chains across the UK. This result for offshore wind means putting economic growth on hold, with over £10bn in investment and thousands of jobs delayed.”
RenewableUK’s executive director for policy and engagement, Ana Musat, said: “There has been a perfect storm of inflation, supply chain disruption and spiralling interest rates that mean the cost of financing and building offshore wind have risen sharply. Offshore wind remains the UK’s cheapest option for large-scale power, so slowing deployment will cost more and leave consumers exposed to volatile global gas markets for longer.
“We urgently need government to provide reassurance that next year’s auction round will offer investable parameters, and that in the longer term a joined-up strategy for maximising the potential of the offshore wind sector is developed.
“As part of that, the industry needs to see credible plans to evolve the CfD to maximise deployment of our cheapest forms of electricity generation, a commitment to develop and fund supply chain growth, and an internationally competitive fiscal regime which attracts capital into the UK.”
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