In a landmark auction for renewable energy subsidies, the UK government has awarded contracts to a series of offshore wind projects that will power up to 12 million homes across the country. This significant step forward in the nation’s clean energy transition comes as the offshore wind industry grapples with rising costs driven by supply chain inflation.
The auction, the most competitive of its kind in the UK to date, saw energy companies vying for contracts that guarantee a set price per unit of clean electricity generated. A total of 8.4 gigawatts (GW) of offshore wind capacity was awarded, including both traditional seabed-fixed turbines and a new generation of floating wind farms that can be deployed in deeper waters.
The winning bids came in at £89.49 per megawatt-hour (MWh) for Scottish projects and £91.20/MWh for those in England and Wales, higher than previous years but still below the typical wholesale power price of around £81/MWh. Two floating wind farm projects secured contracts at £216.49/MWh.
Energy Secretary Ed Miliband hailed the auction as a “record-breaking” success, stating that the secured capacity is “the largest amount of offshore wind procured in any auction ever in Britain or indeed Europe.” He emphasised that the prices are 40% lower than the alternative cost of building and operating a new gas plant, making clean, home-grown power the right choice to bring down bills in the long run.
The auction’s biggest winner was German utility RWE, which secured contracts for nearly 7GW of offshore wind projects, including its Dogger Bank South and Norfolk Vanguard developments. SSE also won a contract for the first phase of its massive 4.1GW Berwick Bank project off the Scottish coast.
While the winning bid prices are higher than in previous years, experts believe the growth of wind power in the UK’s energy system could still help keep bills down by limiting the use of expensive gas plants and reducing the country’s exposure to volatile global fossil fuel markets.
The success of this auction is seen as crucial for the government to achieve its ambitious target of doubling onshore wind, tripling solar power, and quadrupling offshore wind by 2030, with the aim of creating a virtually zero-carbon electricity system by the end of the decade.
However, the government will need to replicate these results in next year’s allocation round, securing another 8GW of offshore wind at similar prices, if it hopes to meet its goal of 43GW to 50GW of offshore wind capacity by 2030.
The auction’s outcomes have also been welcomed by trade unions, who see it as a “golden opportunity” to onshore supply chains and create genuine employment opportunities across the UK. As the nation grapples with the rising cost of living, this investment in renewable energy is seen as crucial for economic growth and energy security.
