In a landmark move, the UK government has secured enough new offshore wind capacity to power 12 million homes, following the most competitive and financially generous renewable energy subsidy auction on record. This historic auction has proven the government’s doubters wrong and paved the way for £22 billion in investment and 7,000 new jobs in the sector.
The auction, which was a crucial test of the government’s pro-growth agenda and its ambition to achieve a clean power system by 2030, saw about 25 offshore wind projects eligible to bid. Ultimately, funding was awarded to 8.4GW of offshore wind capacity, a significant step towards the government’s target of 43-50GW of offshore wind by the end of the decade.
Energy Secretary Ed Miliband hailed the auction as a “historic” achievement, highlighting that it would now bring forward substantial investment and create thousands of new jobs. The auction’s success is particularly crucial for the government, as it seeks to meet its ambitious clean energy targets and address the impending retirement of half the existing gas and nuclear capacity by 2035.
Analysis shows that the electricity generated by the latest offshore wind farms will be 40% less expensive than power from new gas-fired power plants. The average auction price came in at £90.91 per megawatt hour, well below the £94-£95/MWh threshold that experts had identified as necessary to meet the government’s targets without additional cost to consumers.
While the current market price for electricity is around £74/MWh, suggesting consumers may have to offer top-up payments to developers, experts believe the increase in renewable energy will lower future wholesale prices, effectively keeping household energy bills neutral through to 2035.
However, the government still faces challenges, such as the rising costs of connecting these giant wind farms to the National Grid and transporting the electricity to areas of high demand. Failure to keep pace with the build-out of renewable infrastructure could lead to turbines being paid to turn off, further increasing costs for consumers.
Overall, the auction results have kept the government on track to meet its 2030 offshore wind target, but it will need to procure another 8GW of offshore wind in next year’s auction to hit its goal. The pressure is on the industry to continue delivering record-breaking investments while providing value for money to consumers.
