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The next UK renewable energy auction will offer a record £1bn annual subsidy, the government announced on Wednesday but drew criticism from some Scottish Tories for extending the windfall tax on oil and gas producers.
Chancellor Jeremy Hunt on Wednesday allocated four times the amount of support to this year’s bidding round for developers of renewable generating capacity compared to last year.
The allocation includes £800mn earmarked for offshore wind projects as the government tries to revive the sector after failing to attract any bids from maritime wind farm developers in 2023 because the level of support on offer was too low.
Emma Pinchbeck, chief executive of trade group Energy UK, said the government had “listened to the energy industry” and welcomed the boost to the renewables budget, which sent an “important signal” to investors.
But the Conservative chancellor was criticised by senior Scottish politicians from his own party after he extended the windfall tax on North Sea fossil fuel producers for an extra year to March 2029. The measure will raise an extra £1.5bn from the sector, which is based in Aberdeen, Scotland’s third largest city.
Douglas Ross, leader of the Scottish Conservatives, branded the move a “step in the wrong direction”, while Andrew Bowie, a junior energy minister and MP for West Aberdeenshire and Kincardine, said the decision was “deeply disappointing”.
The Aberdeen & Grampian Chamber of Commerce and industry body Offshore Energies UK warned it would deepen job losses in the sector.
“Not only is Jeremy Hunt losing the support of industry, he is also losing the support of his north-east parliamentarians,” said Ryan Crighton, the chamber’s policy director.
Hunt defended the move, saying high energy prices, which led to the decision to impose a windfall tax in the first place, were “expected to last longer . . . [and] so too will the sector’s windfall profits”.
The Labour party, which is well ahead in the polls ahead of an expected general election this year, has said it planned to raise the 75 per cent rate for the levy to 78 per cent and keep it in place until the end of the next parliament.
Hunt also confirmed the government had agreed to buy two sites earmarked for new nuclear power, in Wylfa, Anglesey, and Oldbury, South Gloucestershire, from Hitachi in a bid to revamp plans to build a new generation of reactors.
The Japanese company walked away from plans to build new nuclear power stations at both sites four years ago after failing to reach a financing agreement with the British government.
But the chancellor appeared to announce a short delay in the government’s efforts to support the development of a new type of smaller nuclear power plant, dubbed “small-modular reactors”.
The government had previously said it planned to select the winning designs it would support by spring but Hunt said companies now had until June to submit their initial tender responses.
The renewables auction allocation is used to determine how many renewables projects each round can support and is also dependent on power prices. The government ultimately raises the funding through a levy on consumers’ bills.
Industry estimates suggest up to 9GW of offshore wind projects could be eligible to bid for contracts in this year’s round. The government wants the UK to have 50GW of offshore wind capacity by 2030, up from about 14GW now.
