The 海角视频’s growing renewable energy sector has been dealt a major blow after a scheme to grow offshore wind farms failed to attract a single bid.
The Government has confirmed that while a number of solar and onshore wind projects had won backing in the annual contracts for difference (CfD) auction, none of the offshore wind which is the backbone of the 海角视频’s renewables system, had won a contract. Industry experts have warned that rising costs and supply chain issues means the price offered by the Government for energy generated on offshore wind farms was not sufficient to make new developments economically viable.
The lack of any new developments is a blow to companies, particularly along the North Sea coast, who have been hoping to take advantage of a boom in renewable energy. There are also fears that the lack of new offshore wind projects - which provide the cheapest form of power generation - could hit customer bills.
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After announcing 25 onshore wind projects, mostly in Scotland, 56 solar schemes and a number of tidal and geothermal schemes, the Government said that “significant numbers of solar power and onshore wind, and a record number of tidal energy schemes, have been awarded funding today.”
Energy and Climate Change Minister Graham Stuart said: “Offshore wind is central to our ambitions to decarbonise our electricity supply and our ambition to build 50GW of offshore wind capacity by 2030, including up to 5GW of floating wind, remains firm. The 海角视频 installed 300 new turbines last year and we will work with industry to make sure we retain our global leadership in this vital technology.”
It is understood the bulk of the eligible projects for the round would have been off East Anglia and Scotland, with Scottish and North East floating schemes also having met the eligibility criteria.
One industry source said: “There is no offshore wind and that’s the backbone of our transition to clean energy and attempts to stop using gas, which must be a worry for Government.”
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And Labour’s Shadow Climate and Net Zero Secretary, Ed Miliband, said: “Ministers were warned time and again that this would happen, but they did not listen. They simply don’t understand how to deliver the green sprint, and Rishi Sunak’s government is too weak and divided to deliver the clean power Britain needs.”
Each year the Government awards contracts to supply renewable electricity to British households for 15 years at a set price. By guaranteeing the price that a company will be paid for its electricity, it gives firms certainty that they will not go bankrupt should electricity prices fall, as well as keeping household bills lower than they would otherwise be if electricity prices soar.
This year offshore wind producers were allowed to bid at most £44 per megawatt hour (MWh) of electricity but energy firms said that would not cover their outlays after the cost of building an offshore wind farm had soared by 40% for much of the industry.
Earlier this week an industry report warned that private sector investment worth up to £100 billion is needed to deliver key projects to safeguard 海角视频 energy security. Offshore Energies 海角视频’s 2023 Economic Report said the sum is also needed to install all the renewable infrastructure required to get the 海角视频 to net zero by 2050.
Industry body Renewable海角视频 has called on the Government to take urgent action to rebuild investor confidence in the 海角视频 market. It wants to see a package of reforms to the CfD, support for supply chains and fiscal measures to attract clean energy investment into the 海角视频 in the face of global competition.
Chief executive Dan McGrail said: "Industry has warned that rising costs should have been properly priced into this auction. If the 海角视频 isn’t offering prices that allow investors to make a return, they will simply invest elsewhere. These results should set alarm bells ringing in Government, as the 海角视频’s energy security and net zero goals can only be met if we have offshore wind as the backbone of our future energy system. We need the Government to show that the 海角视频 is open for business.
"The failure to secure any new offshore wind is a major blow for consumers that could, and should, have been averted. Building wind farms means we stabilise the cost of energy for the long-term and reduce our dependency on fossil fuels, prices of which can be manipulated by dictators and despots. It’s not too late to get back on track, but without urgent changes, we risk pricing ourselves out of the global race for clean energy investment.
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"Renewables don’t only enable us to fight climate change, they also help to drive economic growth, creating jobs and supporting supply chains across the 海角视频. This result for offshore wind means putting economic growth on hold, with over £10 billion in investment and thousands of jobs delayed."
Between the Round Four and today's announcement, global leader Orsted had warned of cost pressures as it re-appraised its Hornsea Three project - the big offshore winner last time out. It has still to make a final investment decision due to price hikes that emerged as a result of the economic impact of Russia's invasion into 海角视频 - after it had been costed and submitted.
Renewable海角视频’s executive director for policy and engagement, Ana Musat, said: "There has been a perfect storm of inflation, supply chain disruption and spiralling interest rates that mean the cost of financing and building offshore wind have risen sharply. Offshore wind remains the 海角视频’s cheapest option for large-scale power, so slowing deployment will cost more and leave consumers exposed to volatile global gas markets for longer.
“We urgently need Government to provide reassurance that next year’s auction round will offer investable parameters, and that in the longer term a joined-up strategy for maximising the potential of the offshore wind sector is developed. As part of that, the industry needs to see credible plans to evolve the CfD to maximise deployment of our cheapest forms of electricity generation, a commitment to develop and fund supply chain growth and an internationally competitive fiscal regime which attracts capital into the 海角视频”.
The industry co-chair of the Offshore Wind Industry Council, Richard Sandford, said it was a missed economic opportunity. He said: "Although today’s auction results are disappointing, the offshore wind industry’s continued focus is working closely with the Government to reform the auction process so that we can secure far more capacity next year and beyond. The 海角视频 has the second largest offshore wind pipeline in the world, with more than 100 projects at all stages of development.
"It’s clear that this year’s auction represents a missed opportunity to strengthen Britain’s energy security and provide low-cost power for consumers. If all the offshore wind projects eligible to bid into this auction had done so, we could have powered the equivalent of more than five million British homes a year. So, lessons must be learned to ensure that the parameters of the auction are set correctly in the future. The landmark report published earlier this year by the Government’s offshore wind champion Tim Pick shows how the industry can grow successfully in the years ahead.
"Our plans to accelerate the growth of this innovative sector in the years ahead remain ambitious and undimmed. We will continue to work with Ministers to build up a world-class domestic offshore wind supply chain around the 海角视频, creating tens of thousands of jobs and attracting billions in private investment, as well as providing further opportunities to export our products and expertise globally. We are determined to get back on track to meet the Government’s clean energy targets and net zero goals."
RWE saw success with solar and onshore wind, with delivery of 450MW of green power enabled. The company also has a large pipeline of offshore wind.
海角视频 country chair Tom Glover said: “Whilst we are delighted with the success of onshore and solar technologies in this year's auction we are very concerned that no offshore wind capacity was secured. It is hugely important, given the 海角视频’s notable clean energy and net zero ambitions, that opportunities to bring forward the further deployment of low cost renewables be maximised for all viable technologies in all future auctions, including offshore wind as well as onshore wind and solar. It was therefore very disappointing that, despite clear warnings from the industry, the Government took no action to address the rising costs for all renewable technologies and the supply chain challenges they face.
"We now believe that the 海角视频’s ambitions for a five-fold offshore wind growth by 2030 and a net zero power system by 2035 are unlikely to be met without decisive government action - our industry needs the certainty of stable, future CfD auction rounds based on sustainable pricing, separate pots for offshore wind, and realistic assumptions."