LONDON — Britain’s government is raising the maximum power price that can be charged for new offshore wind and other renewable energy projects in its next Contracts for Difference (CfD) auction.
The CfD scheme ensures a guaranteed price for the electricity generated by renewable energy projects. Ahead of next year’s Allocation Round 6 (AR6), the government has increased the threshold price for fixed offshore wind developments by 66%, from £44/MWh to £73/MWh ($54.7 to $90.7/MWh).
For floating offshore wind, the maximum price will go up by 52%, from the current £116/MWh to £176/MWh ($144 to $218.7/MWh).
The government acted after this year’s auction failed to attract any bids for new offshore wind developments.
Under AR6, offshore wind will also receive a separate funding pot in recognition of the large number of new UK projects waiting in the wings.
Keith Anderson, chief executive of ScottishPower, said the real test of the government’s ambition to grow UK offshore wind power capacity would come when the overall budget for the next auction round is set next year. “But, no doubt about it, this is a step in the right direction," he said.
Lisa Christie, interim UK country manager for Vattenfall in the UK, said the economics of offshore wind development had shifted dramatically over the past 18 months, with rising costs putting pressure on developers and the supply chain.
“But the UK government has now sent a very positive signal that it understands the current market situation and that it wants to attract investment to ensure these projects are built,” she added. “It is also important that as much offshore wind capacity as possible is secured to ensure sustainable pricing for bill-payers. So the total budget for the next auction round must also enable multiple projects to move forward.”
Thibaut Cheret, wind and renewables manager at Offshore Energies UK said his association had identified more than £200 billion ($248.5 billion) of private capital that could be unlocked before 2030 to deliver UK targets in a suitable investment environment.
“So, this is an important step forward, and we’ll continue working with policy makers and our members to help the UK become an irresistible place to do energy business,” Cheret said.
RenewableUK's chief executive Dan McGrail added, “There is the potential for the government to attract a record level of private investment in offshore wind projects next year, with at least 10 projects likely to be eligible, able to power 8.5 million homes each year and reduce the UK’s need for gas by 39%. The framework they’ve set out today is a significant step forward in securing this."
He continued, “Although renewables haven’t been immune from the recent rises in financing and supply chain costs, which all major infrastructure projects have faced, they remain the lowest cost means of generating new electricity.”
Net Zero Watch, however, claimed the price increases were “astonishing,” with lesser rises also approved for geothermal, solar and tidal energy developments. Prices for some of these technologies, it claimed, are now up to six times higher than long-term market averages.
“Worse still, the 66% increase is a minimum. Government is offering wind farm operators ‘more money’ 'if they reduce carbon emissions in their supply chains and demonstrate positive social impact on communities.’ How much money is not specified, leaving the cost to consumers and taxpayers open-ended.”