At a key government auction, held on Friday 8th September 2023, the UK’s future offshore wind plans came to a halt. New offshore wind project contracts were not bought by developers, raising concerns that the 2030 targets of delivering 50 gigawatts (GW) of offshore wind energy will not be met.[1].
The Bid
The government’s annual auction allows companies to bid on renewable energy projects and contracts to supply electricity to the UK grid. Securing projects through this scheme ensures that the successful bidder receives a guaranteed price from the government for the electricity the development will generate (known as a Contract for Difference).[2].
The contracts up for auction in the latest round would have generated 5GW of power; however, hopes of acquiring the additional offshore wind energy were dashed after bids were not placed due to the soaring developing costs. To put this figure into perspective, 5GW could generate enough power to run five million homes; however, the government’s failure to consider the increase in labour and material costs when setting the prices for the electricity generated has rendered the projects not financially viable.
What Does the Future Look Like?
The Department for Energy Security and Net Zero defended the scheme by reassuring the public that ‘significant numbers’ of solar power, onshore wind, tidal energy schemes, and geothermal projects had been awarded funding. The government further stated that the outcome of the auction was in line with similar results in countries such as Germany and Spain.
However, leaders within the renewable energy sector, such as the chief executive of Scottish Power, have expressed their disappointment at the ‘lost opportunity’ and stated that the results should be ‘a wake-up call for government’. The chief executive of SSE further supported the position that the ‘prices were just set too low’ to make an investment viable.
Whilst offshore wind took a hit, 95 clean energy projects secured funding of £227m; an increase from the previous auction, including a record win for tidal energy contracts. The government is still working to reach the 2030 goals; however, the economics of offshore projects need to be considered further by the government to utilise the potential these developments have to generate cost-effective power.
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References
Image: Nicholas Doherty, unsplash.com, 24 January 2019. Last accessed on 21st September 2023. Available at: https://unsplash.com/photos/pONBhDyOFoM
[1] Michael Race, ‘ No bids for offshore wind in government auction’ BBC News, 8 September 2023. Available: https://www.bbc.co.uk/news/business-66749344
[2] ‘No bids for offshore wind in government auction’, New Energy World, 13 September 2023. Available: https://knowledge.energyinst.org/new-energy-world/article?id=138226
