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Industry body RenewableUK is calling on the UK Government to take urgent action to rebuild investor confidence in the UK offshore wind market following a clean power auction that risks undermining targets to boost energy security and jeopardising the industrial opportunities of offshore wind – one of the UK’s most important growth sectors.
The latest auction of clean power contracts has failed to secure any new offshore wind, a technology crucial to meeting the Government’s energy security targets.
In response, RenewableUK is calling for urgent action from Government to fix the investment framework through a package of reforms to the CfD, support for supply chains and fiscal measures to attract clean energy investment into the UK in the face of global competition.
The results of the 5th round of Contracts for Difference (CfD), published this morning, show that 3.7 gigawatts (GW) of new renewable capacity was successful overall. This is the lowest level since 2017 and just over a third of the 10.8GW in last year’s auction.
In this auction round for clean power contracts, up to 5GW of offshore wind was eligible to compete which could have powered nearly 8m homes a year and saved consumers £2bn a year compared to the cost of electricity from gas – a £24 annual saving on an average household bill. However, offshore wind projects did not bid into the auction as a result of the maximum price being set too low.
Industry has previously warned that prices needed to rise to reflect the impacts of the invasion of Ukraine, inflation in key commodities like steel, and increased financing costs from spiralling 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 (MWh).
The auction secured 1.9GW of solar at £47.00 per megawatt hour and 1.5GW of onshore wind capacity at £52.29/MWh, as well as 53 megawatts (MW) of tidal power at £198.00/MWh. The new projects will come online from 2025 onwards. Industry is warning that the failure to secure any new offshore wind capacity risks putting our energy security and net zero targets at risk, keeping the UK dependent on fossil fuels for longer. The auction also failed to secure any innovative floating offshore wind farms, a sector in which the UK aims to be a world leader.
So far, only 27GW has been secured of the Government’s 50GW offshore wind target for 2030 and future auctions will now have to support 4.5-5.8GW a year to get back on target. National Grid forecasts that – regardless of progress on other renewables and nuclear – we will need at least 73GW of offshore wind by 2035 to decarbonise the grid. Offshore wind generates more power per megawatt of capacity than any other renewable source, and the UK’s unique wind resource and shallow seas mean it has been the central technology in plans to end the UK’s reliance on fossil fuels for electricity.
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