Fury as UK Government deals blow to offshore wind hopes

However, it was the first time that the scheme had failed to support any new offshore energy projects since 2015, while the amount of energy created by the new projects, should they be successful, will be the lowest since 2017.

The renewables industry warned the results of the latest auction cast into doubt the Government’s aspiration to be generating 50GW of energy from offshore wind by 2050. Calls were made for action to restore investor confidence in the sector.

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Keith Anderson, chief executive of renewable energy giant ScottishPower, declared: “This is a multi-billion-pound lost opportunity to deliver low-cost energy for consumers and a wake-up call for Government.

“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. ScottishPower 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.”

Industry body RenewableUK said that up to 5GW of offshore wind had been eligible to compete in the auction round for clean power contracts. It said this could have powered nearly eight million homes a year and saved consumers £2 billion a year, compared with the cost of electricity from gas, a £24 saving on an average household bill. But it said offshore wind projects did not bid because the maximum price was set too low.

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The industry said it had previously warned that prices needed to be increased to reflect the impact of Russia’s invasion of Ukraine, cost inflation on key commodities such as steel, and increasing financing costs due to soaring interest rates. However, it said offshore developers saw the maximum price they could bid in this year’s auction cut by £2 to £44 per megawatt hour (MWh).

Dan McGrail, chief executive of RenewableUK, said: “Industry has warned that rising costs should have been properly priced into this auction. If the UK 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 UK’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 UK 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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Simon Virley, vice chair and head of energy and natural resources at KPMG, said: “The lack of new offshore wind projects in the UK Contracts for Difference (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 said: "We are delighted that our first annual contracts for difference auction has seen a record number of successful projects across solar, onshore wind, tidal power and, for the first time, geo-thermal.

“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 UK installed 300 new turbines last year and we will work with industry to make sure we retain our global leadership in this vital technology."

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Perth-based SSE Renewables announced that its onshore Aberarder Wind Farm, Bhlaraidh Wind Farm Extension, Strathy South Wind Farm, and Viking Energy Wind Farm were awarded low-carbon power contracts for a total of 605MW in the CfD round.

The projects will receive the guaranteed strike price of £52.29/MWh, based on 2012 prices but annually indexed since then for consumer prices index inflation, for the electricity they will generate for 15 years from the 2027/28 delivery year.

Stephen Wheeler, managing director for SSE Renewables, said: "We are pleased to have secured onshore wind contracts for Aberarder, Bhlaraidh Extension, Strathy South, and Viking. Onshore wind, like offshore, is a critical component of the net zero transition with an essential role to play in decarbonising the UK's energy supply.

"The CfD scheme has been a hugely successful mechanism for deploying renewable energy, but going forward, changes to the framework for offshore wind are required to ensure the UK can enhance its energy security whilst keeping costs low. Even at higher strike prices than AR5 (allocation round 5), wind power will still be far cheaper than other technologies while also delivering highly skilled green jobs and associated inward investment.

"The good news is that we now have a window of opportunity to ensure that the next auction round can bring forward the significant volumes of both onshore and offshore wind we need to achieve our energy security targets, unlock billions of pounds of investment, and enable the UK to retain its global leadership position in renewables. We stand ready to make these investments and look forward to working constructively with the Government to build on our past successes."

Edinburgh-based Orbital Marine Power, which is focused on the deployment of its pioneering floating tidal turbine in Orkney, was awarded two CfD contracts for 7.2MW, building on the previous round when it secured contracts for the same amount of capacity.

The company said the new contracts will allow it expand its development of projects in Orkney with the construction of six turbines now covered by the CfD scheme.

Andrew Scott, chief executive of Orbital Marine Power, said: "This latest award creates more clarity for us and our supply chain about our immediate ambitions, allowing us to build on our progress to date.

"Securing these latest CfDs is another key step on a path that ends with clean predictable power being delivered to thousands of UK households and businesses, alongside building factories of the future and creating sustainable, green jobs at a ratio that hasn’t been achieved in the renewable space before.

"We maintain our commitment to establishing a valuable supply chain within the UK. Maximising the benefits and rewards from this endeavour will take leadership and long-term commitment from the UK Government.”