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The UK’s plans to develop cleaner energy suffered a major blow when offshore wind developers did not submit any bids for its latest round of contracts.
In this year’s annual auction for subsidies, no offshore wind projects secured contracts. Developers had warned that the government’s lack of support in offsetting their rising costs was a factor.
This failure significantly hampers the UK’s goal of increasing offshore wind capacity to 50 gigawatts by the end of the decade, in line with its legally binding target of achieving net zero carbon emissions by 2050.
Ministers’ inability to secure new sea-based wind-generating capacity was criticized by Ed Miliband, Labour’s shadow climate secretary, who referred to it as an “energy security disaster”.
The government has acknowledged offshore wind technology as the “backbone” of the future energy system, according to the Climate Change Committee, its independent climate adviser.
In light of the mounting criticism, a government official suggested that next year’s round, opening in March, could offer a higher guaranteed maximum price for offshore wind. “We are carefully considering today’s results to make appropriate adjustments,” they stated.
Despite the lack of offshore wind projects, the government highlighted the successful procurement of contracts for other renewable power generation methods in the auction. It emphasized the inclusion of a “record” 95 projects using solar, onshore wind, tidal, and geothermal technologies for the first time.
However, these projects only accounted for 3.7 gigawatts of generating capacity, the lowest level since 2017 and just over one-third of the capacity awarded last year, according to Renewable UK, the trade body.
Dan McGrail, chief executive of Renewable UK, expressed concern over the offshore wind results, stating that they should serve as a warning to the government. He urged ministers to take “urgent action” in rebuilding investor confidence.
Keith Anderson, chief executive of wind developer ScottishPower, emphasized the need to address the situation, saying “The most important thing now is to focus on how to fix it.”
Sir John Armitt, chair of the UK’s National Infrastructure Commission, described the absence of offshore wind projects as “disappointing” and called for the government to “urgently learn the lessons from this process”.
In the UK, renewable energy projects are supported by the “contracts for difference” system, which guarantees developers a fixed price for the electricity they generate over 15 years.
This system has facilitated the rapid growth of the offshore wind sector over the past decade. The UK is now the second-largest offshore wind market globally, after China, and offshore wind supplied approximately 11% of the country’s electricity in 2021.
However, rising costs for turbines and labor globally led developers to urge ministers to increase the subsidies offered in this year’s auction.
Vattenfall, one of the country’s major wind farm developers, suspended work on a significant offshore wind project in July due to surging costs of up to 40%. The Swedish developer stated that the project was no longer financially viable under the price guaranteed in the contract awarded last year. Rising costs have also affected other countries.
The British government is fully aware of the importance of ensuring value for money for taxpayers through its renewable auctions, according to an official.
RenewableUK stated that the offshore wind projects eligible for this year’s round could have powered nearly 8 million homes and “saved consumers £2 billion a year compared to the cost of electricity from gas”.
Tom Glover, UK country chair for energy giant RWE, which won contracts for multiple onshore wind and solar projects, expressed concerns that the government’s target of 50 gigawatts of offshore wind by 2030 is now at risk. He added, “We are running out of time.”
Graham Stuart, energy and climate change minister, asserted that offshore wind is crucial to decarbonizing the UK’s electricity supply. He pledged to work with the industry to maintain the country’s global leadership in this vital technology.
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