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The UK’s aim to develop cleaner energy has taken a step forward after a record 131 clean energy projects won state subsidy contracts in this year’s auction round.
The projects, announced on Tuesday, could provide electricity to the equivalent of 11mn homes, supporting the sector after a botched auction round last year in which no offshore wind developers bid.
The government said it was the “biggest round ever” with a total of 9.6 gigawatts of projects winning state guarantees on their electricity price. That includes more than 5GW of offshore wind projects.
However, the offshore wind projects secured still leave the government off track for its target of quadrupling offshore wind capacity by 2030.
Developers rebidding portions of projects that won contracts in previous rounds in order to get a higher price also accounted for 29 per cent of the offshore wind capacity secured in the auction.
Government rules allow developers to withdraw and therefore rebid about a quarter of the capacity they are awarded each year.
Sam Hollister, head of energy economics, policy and investment at LCP Delta, the consultancy, said: “This year’s auction might have helped to turn the ship around after last year’s disappointment, but this is by no means a renewable energy drive that is going full steam ahead.”
Alon Carmel, partner for energy transition at PA Consulting, estimated that the rebidding could cost consumers about £252mn more under the higher price.
The auction round was a test of the new Labour government’s strategy on renewables, after it increased the auction budget in July to support developers with rising costs. The guaranteed electricity prices secured by some technologies have risen compared with last year’s round.
Ed Miliband, secretary of state for energy and net zero, said the government and energy industry were “securing investment into our country”, adding it was “another significant step forward in our mission for clean power by 2030”.
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Keith Anderson, chief executive of offshore wind developer ScottishPower, said offshore wind was “back on track after last year’s mis-step”. He added: “The only solution to weaning the UK off volatile fossil fuels which are the root cause of increasing bills is more clean, green energy.”
The government aims to quadruple offshore wind capacity, triple solar power and double onshore wind by 2030 in order to meet its target of net zero power.
In the UK, renewables are supported by the contracts-for-difference auction system, which guarantees developers a fixed price for the electricity they generate over 15 years.
Under the scheme, developers are paid the difference between the fixed price agreed with the government and the wholesale price when they sell their electricity, if the wholesale price is lower.
If the wholesale price is higher than the fixed price, companies have to pay back the difference.
Several of the offshore wind projects awarded contracts in this round had been given contracts in previous rounds but were rebidding in order to receive a higher price.
Big winners include Ørsted, the Danish offshore wind developer, which won contracts for two giant wind farms it is building off the Yorkshire coast. ScottishPower also secured a contract for a 963-megawatt wind farm off the coast of Suffolk.
The total 9.6GW capacity awarded across all technologies is 5.9GW higher than last year’s round, according to Pranav Menon, research associate at Aurora Energy Research.
Solar power was one of the big winners, with almost 3.3GW of new capacity awarded contracts in England, Scotland and Wales.
In this auction round, offshore wind developers won contracts guaranteeing them a fixed price of £58.87 a MWh and £54.23 a MWh. Prices are given in 2012 money, indexed to inflation.
That compares with a record low £37.35 a MWh awarded to offshore wind developers in 2022.
Duncan Clark, head of UK & Ireland at Ørsted, said the government had “shown it takes renewable energy seriously”. He added: “We’re confident it will continue working with the sector to increase the volume of projects deployed in the UK.”
The UK’s spot wholesale electricity price is currently about £80 a MWh.
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