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No offshore wind projects are included in the latest Contracts for Difference (CfD) auction, the official results of the fifth allocation round have confirmed.
There had been widespread speculation that offshore wind developers had shunned the process because of the government’s failure to recognise soaring costs by raising the cap on strike prices. Floating wind projects are also absent from the latest results.
It has led to accusations that ministers have undermined their own target of generating 50GW of offshore wind by 2030.
According the think tank Britain Remade the “catastrophic outcome will cost hard-pressed billpayers £1 billion a year”.
In the absence of offshore wind, solar secured half of the total 3.7GW capacity in the first annual CfD auction.
The Department for Energy Security and Net Zero was keen to point out that a record 95 new projects had secured contracts (up from a high of 93), including the first geothermal schemes, which put forward 12MW of capacity.
Alongside solar, onshore wind developments will provide 1.5GW of capacity, with 24 projects securing contracts, up from 10 in the previous auction.
The 1.9GW of solar projects all cleared at their administrative strike price of £47/MWh – the maximum allowed by the government – whilst the onshore wind projects, including the one successful remote islands project, came in slightly below their £53/MWh cap at £52.29/MWh. The geothermal projects also secured contracts at their maximum rate of £119/MWh. The 53MW of tidal projects came in £4/MWh below their limit at £198/MWh.
In the run-up to the auction, critics had complained that the £227 million budget for annual subsidies, even with a late £22 million boost, was too low, as were the administrative strike prices. This is at a time when costs for offshore wind developers are estimated to have risen up to 40%.
There was a furious reaction from Scottish Power chief executive Keith Anderson, who called the results “a multi-billion pound lost opportunity to deliver low-cost energy for consumers and a wake-up call for government”.
He added: “The CfD process is recognised globally as a lynchpin of the UK’s offshore success, but it also needs to flex to keep pace with the world around it. We all want the same thing – to get more secure, low-cost green offshore wind built in our waters. Scottish Power is in the business of building windfarms and our track record is second to none in terms of getting projects over the line when others haven’t been able to. But the economics simply did not stand up this time around.
“We need to get back on track and consider how we unlock the billions of investment in what is still one of the cheapest ways to generate power and meet the UK’s long-term offshore wind ambitions for the future.”
Meanwhile, Simon Virley at KPMG said: “The lack of new offshore wind projects in the UK CfD auctions is a major setback at a critical time when we should be looking to accelerate renewables. After record breaking rounds in previous auctions, this is the first time since CfDs launched in 2015 that there have been no new offshore wind projects announced and will call in to question the government’s target of 50GW by 2030 and the ambition to get to a net zero power system by 2035.
“This outcome reflects the growing inflationary and supply chain pressures affecting the offshore wind sector in recent years, which is making it harder to deliver these projects at the strike prices and other auction parameters set by the government. The government will need to review urgently these parameters ahead of Auction Round 6, if it wants the British success story on offshore wind to continue.”
Energy and climate change minister Graham Stuart insisted that offshore wind remains “central to our ambitions to decarbonise our electricity supply”, insisting the 50GW target, including up to 5GW of floating wind, “remains firm”.
He added: “This year’s record breaking CfD round builds on years of renewables growth under this government. Just 7% of our electricity came from renewables in 2010, yet in the first quarter of this year it reached 48% and this first annual auction will allow us to go further in powering more of Britain from Britain.”
More to follow…..
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