Offshore Wind is Big Winner in U.K. Power Auctions

Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland)-- Offshore wind projects have dominated the latest U.K. government power auctions, coming in far cheaper than new nuclear power for the first time.

In the second round of the Contracts for Difference (CfD) auction, the government awarded contracts to three proposed offshore windfarms with a combined capacity of 3.2 gigawatts (GW). They are the 1.4-GW Hornsea 2 project by DONG Energy A/S (Fredericia, Denmark) off the Yorkshire coast, the 950-megawatt (MW) Moray 1 project by EDP Renovaveis (Lisbon, Portugal) and ENGIE (EPA:ENGI) (Paris, France) off the northern coast of Scotland and the 860-MW Triton Knoll windfarm off the Lincolnshire coast by innogy SE and Statkraft AS (Oslo, Norway). The contracts, which run for a period of 15 years, also broke records as the lowest-cost offshore wind projects in the U.K..

Triton Knoll, which will be commissioned in 2021-22, came in with a strike price for power generated at £74.75 ($99) per megawatt hour (MWh), while Hornsea 2 and Moray 1, which will start providing power from 2022-23, came in at £57.50/MWh ($76). In the first auction in 2014, DONG secured a CfD for the sister 1.2-GW Hornsea 1 project at £140/MWh ($185), well over twice the price agreed for Hornsea 2. By contrast, the government's first new nuclear power project in 25 years, Hinkley Point C, secured a strike price of £92.50/MWh ($122) and is not expected to start generating power until after 2026.

Minister for Energy and Industry, Richard Harrington, said: "We've placed clean growth at the heart of the Industrial Strategy. The offshore wind sector alone will invest £17.5 billion ($23 billion) in the U.K. up to 2021, and thousands of new jobs in British businesses will be created by the projects announced today. This government...will set out ambitious proposals in the upcoming Clean Growth Plan. This investment will help the U.K. meet its climate targets while supporting jobs in Britain's growing renewables industry. The U.K. has the largest offshore wind capacity in the world, and low carbon businesses have a combined turnover of £43 billion, employing 234,000 people."

Matthew Wright, managing director for DONG Energy U.K., added: "This is a breakthrough moment for offshore wind in the U.K. and a massive step forward for the industry. Not only will Hornsea Project 2 provide low cost, clean energy to the U.K., it will also deliver high-quality jobs and another huge boost to the U.K. supply chain. Successive governments deserve great credit for providing the certainty for continued investment in offshore wind, enabling it to become the thriving renewable industry it is today. Costs are falling rapidly, long-term and highly-skilled jobs are being created across the north of England, and the U.K. supply chain is going from strength to strength."

Competitive power auctions are becoming increasingly important in driving down the costs of renewable energy in a growing number of European countries. Earlier this year, a number of proposed German offshore projects became the first windfarms in the world to be built without government financial aid. For additional information, see April 20, 2017, article - World's First 'Subsidy-Free' Windfarms Get German OK.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Our European headquarters are located in Galway, Ireland. Follow IIR Europe on: Facebook - Twitter - LinkedIn For more information on our European coverage send inquiries to info@industrialinfo.eu or visit us online at Industrial Info Europe.