Avoidable and botched: Green groups react to offshore wind omission in CfD auctions

Pictured: The Walney offshore wind farm

The Government’s latest CfD allocation round saw a total of 95 clean energy projects accepted, with onshore wind and solar accounting for the majority of the funding allocation.

However, one of the major concerns highlighted by green groups is the absence of offshore wind in the latest funding round. Not a single offshore windfarm bid was accepted in this round of auctions. Details also show that despite an increased number of projects, the round secured three times less capacity and five times less output compared to last year’s results. The Government claims the projects will generate power equivalent to accounting for the energy needs of two million homes.

The UK Government has reiterated its commitment to build 50GW of offshore wind capacity by 2030, but green groups have chastised the latest auction over the omission of offshore bids based on cost as well as concerns over the overall capacity of the accepted projects.

Here, edie rounds up all the key reactions.

Jess Ralston, Energy Analyst at the Energy and Climate Intelligence Unit (ECIU) said: “The renewables that were secured at this auction are still lots cheaper – a third for some technologies – than wholesale power prices which are set by gas.

“But the elephant in the room is the renewables that weren’t secured. We’ve potentially missed out on bill savings worth over £1bn from no offshore wind bids, which again would be far cheaper than the alternative gas. That’s bad news for households, the industry and the Government – not a good look for outdated Treasury rules to be blocking cheaper bills ahead of the next Election.

“The industry says our offshore wind market, the second largest in the world, is ready to deliver. Will the government rerun this auction with sensible strike prices?”

Simon Virley CB, Vice Chair and Head of Energy and Natural Resources at KPMG, said: “The lack of new offshore wind projects in the UK Contracts for Difference (CfD) auctions is a major setback at a critical time when we should be looking to accelerate renewables. After record breaking rounds in previous auctions, this is the first time since CfDs launched in 2015 that there have been no new offshore wind projects announced and will call into question the Government’s target of 50GW by 2030 and the ambition to get to a Net Zero power system by 2035.

“This outcome reflects the growing inflationary and supply chain pressures affecting the offshore wind sector in recent years, which is making it harder to deliver these projects at the strike prices and other auction parameters set by the Government.  The Government will need to review urgently these parameters ahead of Auction Round 6, if it wants the British success story on offshore wind to continue.”

Co-Chair of the Offshore Wind Industry Council, Richard Sandford, said: “Although today’s auction results are disappointing, the offshore wind industry’s continued focus is working closely with the Government to reform the auction process so that we can secure far more capacity next year and beyond. The UK has the second largest offshore wind pipeline in the world, with more than a hundred projects at all stages of development.

“It’s clear that this year’s auction represents a missed opportunity to strengthen Britain’s energy security and provide low-cost power for consumers. If all the offshore wind projects eligible to bid into this auction had done so, we could have powered the equivalent of more than five million British homes a year. So, lessons must be learned to ensure that the parameters of the auction are set correctly in the future. The landmark report published earlier this year by the Government’s offshore wind champion Tim Pick shows how the industry can grow successfully in the years ahead.”

Luke Murphy, associate director for energy and climate at IPPR, said: “This was an avoidable yet deeply harmful failure of government policy and planning. The UK will miss out on billions in green investment, cheaper energy bills, and lower emissions as a result, and cement the idea that the UK has somersaulted from a clean energy leader to laggard.

“It also makes meeting the UK’s ambition to triple offshore wind capacity by 2030 and its wider climate targets all the harder. It’ll also leave the UK more reliant on volatile, expensive, imported gas. Ministers were warned repeatedly that the price set in this auction round was too low and needed to be raised to reflect the rising cost pressures facing large infrastructure projects.

“The government must learn the lesson of this failure quickly and ensure that future rounds reflect the reality of rising costs for developers and the benefits of delivering offshore wind at pace and scale.”

Dan McGrail, chief executive RenewableUK said: “Industry has warned that rising costs should have been properly priced into this auction. If the UK isn’t offering prices that allow investors to make a return, they will simply invest elsewhere. These results should set alarm bells ringing in Government, as the UK’s energy security and net zero goals can only be met if we have offshore wind as the backbone of our future energy system. We need the Government to show that the UK is open for business.

“The failure to secure any new offshore wind is a major blow for consumers that could, and should, have been averted. Building wind farms means we stabilise the cost of energy for the long-term and reduce our dependency on fossil fuels, prices of which can be manipulated by dictators and despots. It’s not too late to get back on track, but without urgent changes, we risk pricing ourselves out of the global race for clean energy investment.”

Solar Energy UK chief executive Chris Hewett said: “We are pleased that so many solar projects have been successful in AR5, particularly as solar has only recently been able to participate. This shows how resilient solar has become to economic shocks. It remains the cheapest way to generate power in the UK. That said, we need to be roughly doubling the pace of solar installations to meet the Government’s capacity target of 70GW by 2035.

“CfDs are far from the only route to market for utility-scale solar. Some developers will prefer to sell on a merchant basis or seek a long term power purchase agreement. The AR5 results are therefore not a cap on deployment of solar farms and we are seeing record high rooftop solar installation in 2023.”

Mike Childs, Friends of the Earth’s head of policy, said:  “The failed offshore wind auction was highly predictable. The government has missed yet another open goal that would have boosted energy security and made household bills more affordable.

“Since energy bills shot up last year, ministers have refused to invest in home insulation, despite our housing stock being amongst the worst in Europe and failed to unleash the full potential of our vast onshore wind resources. This week’s wind reforms don’t go nearly far enough.

“Now it’s botched an auction that should have led to a boom in offshore wind with all the economic benefits this would bring. The new Secretary of State, Clare Coutinho needs to get a grip on her failing department – and quickly.”