A significant blow has been dealt to the UK’s decarbonisation strategy following no offshore wind bids being submitted in the latest Allocation Round.
The round works on a contracts for difference mechanism which guarantees consumers will pay a fixed price for the energy generated by the bidder. With lower wholesale prices subsidies added to customer bills top up the difference. On the other hand, higher wholesale prices mean the developers backpay the difference.
Although the industry has warned the UK government ahead of the round regarding the soaring costs faced by offshore wind developers, it appears to have been in vain.
Ahead of the round, the UK government set fixed-bottom and floating offshore wind price caps at £44 ($55) per MWh and £114 ($142) per MWh, deemed to be too low by experts as the cost of development jumped by around 40%.
With the fixed cost not attracting any bids, the UK’s target of reaching 50GW of offshore wind by 2030 hit a serious obstacle.
Opponents of Prime Minister Rishi Sunak’s government heavily bashed today’s news. Ed Miliband, Labour’s Shadow Energy Security and Net Zero Secretary, said that this was an energy security disaster and a £1bn “bombshell that will push bills up for hardworking families.”
He noted that the offshore wind industry “was meant to be the crown jewels of the British energy system” and that all the warning signs were there but the government’s persistence on low price caps now blocked “the cheap, clean, homegrown power” the UK needs.
“They simply don’t understand how to deliver the green sprint [and how] to deliver the clean power Britain needs. Every family and business are paying the price for these failures in higher energy bills, and our country remains exposed,” Miliband stated.
The UK government’s silver lining in all of this is, if there is one, lies in the fact that a total of 95 clean energy projects have been successful with their bids – but none of them were offshore wind projects.
The latest round had budget funding of £227m and has secured enough to power the equivalent of 2m homes through the support of 3.7GW in solar, onshore wind, tidal, and geothermal projects. For comparison, last year’s round supported 7GW in just offshore wind projects.