U.K. Offers $1.3 Billion to Lift Offshore Wind Projects

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Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland)--The U.K. government is hoping to spur investment in renewable energy projects by offering more than 1 billion pounds (US$1.3 billion) in financial support in its upcoming energy auction--four times more than the last auction in 2023.

The bulk of the money, more than £800 million (US$1 billion), is going to offshore wind in an urgent attempt to attract investors. A further £120 million (US$152 million) in aid is being made available for established technologies such as onshore wind and solar while £105 million (US$133 million) will go to emerging technologies such as floating offshore wind and geothermal, including a ring-fenced £10 million (US$12.7 million) budget for tidal energy.

The previous auction in September last year failed to receive a single bid from offshore wind developers, despite the U.K. being the largest offshore wind nation in Europe. At the time, the government was offering financial support for up to 5 gigawatts (GW) of new windfarm projects through its Contracts for Difference (CfD) scheme, which sets a guaranteed price for power generated. At that time, the price of £44 (US$54) per megawatt-hour (MWh) was similar to that offered in 2022 and failed to attract any interest. Many in the industry claimed it was too low considering higher rates of inflation and a general increase in the costs of construction and supply chain difficulties exacerbated by Russia's war in Ukraine. For additional information, see September 26, 2023, article - U.K. Fails to Attract Any Offshore Wind Bidders.

This time round, the sixth auction later this month will see the maximum strike price increased by 66% for offshore wind projects to £73/MWh (US$93) and by 52% for floating offshore wind projects to £176/MWh (US$223). The U.K. government has ambitions of deploying 50 GW of offshore wind by 2030 but last year's failure to attract any bidders for its funding has dented those targets. Today, the U.K. has 14.7 GW of operational offshore wind, which generates 14% of its electricity. Industrial Info is tracking 55 active offshore wind projects in the U.K. worth US$183 billion in investment. Subscribers to Industrial Info's Global Market Intelligence (GMI) Project Database can click here for the reports.

U.K. Energy Security Secretary Claire Coutinho said: "When it comes to renewables, we have a record to be proud of. In 2010, just 7% of our electricity came from renewables, this is now up to over 40% today. We have the second largest renewables capacity in Europe, which is backed by £300 billion (US$381 billion) of investment since 2010, with £24 billion (US$30 billion) since September alone. We are sticking to the plan to deliver the long-term change our country needs to deliver a brighter future for Britain - securing more homegrown, green energy we can protect billpayers from volatile gas prices."

According to renewable industry association RenewableUK, 10 GW of offshore wind projects are eligible to bid but this auction will only secure 3-5 GW of those projects. It predicts a better outcome overall and believes it will lead to over £8 billion (US$10 billion) in private investment and the creation of 10,000 jobs in the U.K.. Chief Executive Dan McGrail said: "We welcome this budget increase, as it recognises that global economic conditions have changed, and it will secure a significant amount of new offshore wind capacity and private investment, as well as creating thousands of new jobs."However, the Treasury has missed the opportunity to maximize the amount of capacity which the U.K. could have secured in this year's auction for new offshore wind farms. We have more than 10 gigawatts of capacity eligible to bid for this summer. Building this is essential if we're to make up lost ground from last year's auction and create the substantial pipeline required to accelerate supply chain investment and growth in the UK. This funding will only secure between 3 to 5 gigawatts."

Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).