The latest UK auction for offshore wind power contracts, one of the biggest in the world, has reportedly received zero bids from developers.
According to sources cited by The Times and the BBC, the government has procured few, if any, bids for contracted power from new large-scale offshore wind farms in its latest auction, the results of which are due to be announced later this week.
This would be an unprecedented result, after the fourth auction for renewable energy power contracts secured more gigawatts (GW) of future energy supply than the previous three auctions combined, delivering record offshore wind capacity of nearly 11 GW.
Such a result would represent the lowest uptake by a government renewable power scheme since Greg Barker’s Green Deal scheme received scant interest in the months after it was launched a decade ago in 2013.
High inflation of about 40% has made the cost of building wind farms too expensive to provide power at the low rates offered under the government contract guarantee.
The strike price, which is the fixed price paid for energy under guaranteed contracts offered under the government auction scheme, has long been contentious. The offshore wind power industry claims that the strike price paid for ‘contracts-for-difference' (CfDs), which are designed to guarantee a rate for power by paying the difference when the wholesale price drops, is too low, and that it fails to reflect the rising costs of materials and production.
The government disregarded calls to raise the strike price in line with inflation, and has refused to increase the price ceiling for offshore wind even though it is now lower even than the price offered for gas-fired power plants.
Offshore wind developers such as Vattenfall have argued that the cost of materials and resources in their supply chain has inflated by approximately 40%, with prices now outstripping the guaranteed power price offered under the government’s contracts-for-difference.
Developers Vattenfall, ScottishPower and SSE — which are together developing a combined 5 GW of energy capacity that would have been eligible for power contracts under the scheme — have all warned about the impact of inflation on the offshore wind industry.
They have warned that inflation has made the cost of building offshore wind farms in the latest round unfeasible.
The cost of wind power has fallen to such an extent in recent years that the newly appointed Offshore Wind Champion Tim Pick said in an independent report in March that the fixed bottom cost of offshore wind had the “lowest clearing strike price” of all renewable energy technologies qualifying for guaranteed CfD contracts.