The UK’s leadership position as the biggest market for offshore wind was “already in jeopardy” due to a slowdown in construction projects [Regen, Exeter]
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Over the weekend, the government wanted to auction off its offshore wind project contracts – but there was no interest:
The technology has been described as the “jewel in the UK’s renewable energy crown”, but firms have been hit by higher costs for building offshore farms, with materials such as steel and labour being more expensive. The UK is a world leader in offshore wind and is home to the world’s four largest farms, supporting tens of thousands of jobs, which provided 13.8% of the UK’s electricity generation last year, according to government statistics.
It was hoped offshore wind in the latest round could have helped generate five gigawatts of power, enough to run five million homes, but wind farm builders had warned for months that the government was not taking into account how much the costs of developing them had soared. Industry insiders told the BBC that the £44 per megawatt hour price floor set for the latest auction failed to take account of higher costs.
The VGS has worked with the independent centre of energy expertise Regen – which has responded to the news, saying the government ‘needs to take action’ to rebuild confidence in offshore wind, as reported on the Business Live website:
The Exeter firm has detailed how the UK’s leadership position as the biggest market for offshore wind was “already in jeopardy” due to a slowdown in construction projects and “increased” competition from the US, Asia and other European development areas. However, Regen said that offshore wind must still be considered as “a major UK success story”, with a rapid fall in costs over the past decade and an associated increase in UK content and supply chain jobs.
Today’s FT was damning, saying that “the government needs to restore confidence in its renewables pricing regime”:
Last year the government committed to raise its offshore wind capacity to 50 gigawatts by 2030. After receiving zero offshore wind bids at its fifth auction — which will add about 3.7GW in other renewable energy capacity — the UK is about 36GW short of its goal with seven years to go. Onshore wind projects are, meanwhile, stymied by planning rules despite last week’s partial easing of a de facto ban. If Britain cannot harness its abundance of wind effectively, it will face an uphill battle to meet its emissions targets...
But ultimately, the government needs to learn from this failure. Its processes for setting price caps ought to be reviewed. It should be more flexible and incorporate significant shifts in costs and interest rates into its offer. Providing information in advance on how prices will be set will help developers plan ahead too. It should also consider accelerating its future wind auctions. Last week’s failure puts the UK’s net zero journey at risk and sends a bad signal to investors, who may now look for projects elsewhere. Tempestuous weather is indeed a mixed blessing. But when it comes to energy security and cutting emissions, wind is a strength Britain must lean into.
Yes, the UK government has eased the de facto ban on onshore wind farms, and yes, even in Europe, offshore wind is facing huge challenges – and yet the view seems to be that the UK’s net zero ambitions are at risk after this ‘disastrous’ offshore wind auction.
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