The UK government needs to "take urgent action" after not one single bid was received for new offshore wind in its latest auction, jeopardising a plan to triple power capacity from this source by 2030.
It was confirmed this morning that no new contracts were secured for any of the 5GW of offshore wind capacity up for grabs at the latest auction round, verifying reports about the offshore wind auction yesterday and creating an early problem for Downing Street's new energy secretary Claire Coutinho.
Overall results of the fifth round of Contracts for Difference (CfD), published this morning, were at the lowest level since 2017, with only 3.7 gigawatts (GW) of new renewable capacity being successful overall - just over a third of the 10.8GW in last year’s auction.
These were for other forms such as solar and tidal energy projects in Scotland and Wales, where a Simec Atlantis consortium successfully secured a contract, and onshore wind.
Going into the auction, there had been boasts from the government about the extra level of funding in the auction for wind, solar and less established technologies, though funds allocated for the 'round five' auction were £58 million less than in the fourth round last year.
Lost opportunity
It was described as "a multibillion-pound lost opportunity to deliver low-cost energy for consumers and a wake-up call for government" by the CEO of ScottishPower and “the biggest disaster for clean energy policy in the last eight years” by Greenpeace.
“The government has missed yet another open goal that would have boosted energy security and made household bills more affordable," said Mike Childs, Friends of the Earth’s head of policy.
It means the UK has missed out on powering nearly 8m homes a year and saving consumers £2bn a year compared to the cost of electricity from gas.
Industry body RenewableUK said the government needs to "take urgent action to rebuild investor confidence".
RenewableUK said Downing Street needed to "fix" the investment framework through a package of reforms to the CfD scheme, with extra support for supply chains and fiscal measures to attract clean energy investment into the UK.
This is especially so with more attractive support for green policies in other countries, notably in the US from President Biden's Inflation Reduction Act.
Mike Tholen, sustainability and policy director at the OEUK offshore industry body, said the poor uptake at the wind auction "is a clear indicator that the system is in urgent need of attention".
Unattractive prices
The lack of bids in the auction was said to reflect rising prices for the industry, as recently shown in the Orsted profit warning.
There have been calls for CfD prices, which guarantee prices to supply renewable electricity for 15 years at a set price, to rise to reflect the impacts of the invasion of Ukraine, inflation in steel and other key commodities, and increased financing costs from higher interest rates.
However, offshore wind developers saw the maximum price they could bid in this year’s auction cut by £2 to £44 per megawatt hour, RenewableUK said. Original CfD prices when the scheme was launched in 2015 topped off at £155 per MWh.
So far, 27GW of the government’s 50GW offshore wind target for 2030 has been secured, with National Grid forecasting at least 73GW of offshore wind will be needed by 2035 to decarbonise the grid, on top of energy from other renewable sources, as offshore wind generates more power per megawatt of capacity than any other renewable source.
The UK’s unique wind resource and shallow seas mean wind power has been the central technology in plans to end the UK’s reliance on fossil fuels for electricity, RenewableUK said.
Dan McGrail, chief executive of the organisation, 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."