‘Historic’, ‘unprecedented’, ‘astounding’: Industry reacts to falling offshore wind costs

Developers, green groups and politicians have welcomed the latest results from the UK Government's Contract for Difference (CfD) auction, which has seen the cost of offshore wind halve over the last two years to set a record low-strike price of £57.50 per MWh.

Results published by the Department of Business, Energy and Industrial Strategy (BEIS) show that 11 energy projects worth £176m annually were awarded contracts in the auction. Three offshore projects, the 1.4GW Hornsea Project Two, the 860MW Triton Knoll farm and 0.95GW Moray Offshore Windfarm (East), representing 3.2GW of new capacity, were awarded contracts.

The Moray and Hornsea projects were issued contracts with a record strike price of £57.50 per MWh, while the Triton Knoll project gained one at £74.75. The mean average strike price for the projects was £66.13 per MWh, well below the sector’s target to bring costs below the £100 per MWh threshold by 2020.

BEIS’ minister for energy and industry Richard Harrington said: “The offshore wind sector alone will invest £17.5bn in the UK up to 2021 and thousands of new jobs in British businesses will be created by the projects announced today. This government will continue to seize these opportunities as the world moves towards a low carbon future, and will set out ambitious proposals in the upcoming Clean Growth Plan.”

“This investment will help the UK meet its climate targets while supporting jobs in Britain’s growing renewable industry. The UK has the largest offshore wind capacity in the world and low carbon businesses have a combined turnover of £43bn, employing 234,000 people.”

Biomass and energy form waste technologies also received support from the latest round of auctions, but much of the focus has been on offshore wind, which has seen prices fall from £117 per MWh in 2015.

For instance, the latest contracts mean that the world’s largest offshore wind farm will be constructed off the UK coast, with the strike price of £57.50. DONG Energy’s Hornsea Project Two will have a 1,386MW capacity, surpassing the 1,200MW Hornsea Project One. Hornsea Project Two is expected to be operational off the Yorkshire coast by 2022.

DONG Energy’s managing director Matthew Wright said: “This is a breakthrough moment for offshore wind in the UK and a massive step forward for the industry. Not only will Hornsea Project Two provide low cost, clean energy to the UK, it will also deliver high quality jobs and another huge boost to the UK 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 UK supply chain is going from strength to strength. We’re now really seeing the benefits of this commitment to offshore wind and there is still so much more to come. Indeed, it has the potential to play a key part in the realisation of the UK’s industrial strategy.”

The results make offshore wind cheaper than both nuclear and gas. With Hinkley Point C on course to breach its budget by £1.5bn, Green Party co-leader Caroline Lucas claimed that the latest contracts should be the “the nail in the coffin” for the UK’s nuclear aspirations.

“This massive price drop for offshore wind is a huge boost for the renewables industry and should be the nail in the coffin for new nuclear,” Lucas said. “While clean, green wind power has the potential to seriously cut people’s bills – the government’s undying commitment to new nuclear risks locking us into sky high prices for years to come. Put simply, this news should be the death knell for Hinkley.” 

Reaction Roundup

Liberal Democrat spokesperson for energy and climate change Lynne Featherstone
“The new, lower cost of offshore wind is phenomenal, it’s fallen so much faster than most experts imagined. This gives us a glimpse of the future possibilities for the UK becoming clean, green and carbon-free.
“We need an even greater investment in renewables, so the price continues to come down. This in turn will help to bring down consumer energy bills.”

Atlantis’ chief executive officer Tim Cornelius

“We’ve made great strides in reducing our cost of generation so that we can slash our requirement for revenue support, and I am incredibly proud of the work the Atlantis team has done in this respect. However, I must acknowledge the difficulties of competing on a level playing field with established technologies like offshore wind, which has been operating at commercial scale in the UK for over a decade.

“It would be a travesty if the UK were to lose out on another emerging industry where it has established a first-mover advantage and where the cost of energy is on a steep downward trajectory.  Our UK portfolio contains some of the best tidal stream sites in the world, and we support the ambition to ensure that the development of these sites is achieved through a UK focused supply chain rather than relying on imported skills and goods. We hope that the UK can continue to play a leading role in an industry it helped create over the past decade.”

Scottish Renewables’ deputy chief Executive Jenny Hogan

“The results of this latest auction are good news for Scotland, for our environment and for our energy system. The cost reductions seen in offshore wind in particular have been dramatic and are testament to the determination of developers to drive down costs. The scale of innovation taking place across the sector and its growing supply chain show the importance of ensuring a viable, competitive route to market is available for clean power technologies.

“The biomass CHP plant at Grangemouth has also demonstrated significant cost reduction. However, onshore wind and solar are currently excluded from competing in Contracts for Difference auctions. The government has the tools to drive down costs even further and these technologies can and should be allowed to play their role in delivering the government’s own Industrial Strategy.”

The Energy and Climate Intelligence Unit’s (ECIU) energy analyst Dr Jonathan Marshall

“Having put the groundwork in, the UK is now poised to reap the rewards from unprecedented falls in costs in offshore wind. These latest results show that offshore wind is no longer an expensive technology. It is much cheaper than new nuclear reactors, is heading for cost parity with the cheapest technologies, and with an increasingly UK-based supply chain.

“With an expanse of shallow waters surrounding us, the UK now has the chance to consolidate our position as the European champion of offshore wind. However, to garner the full benefits of this revolution, the government should continue to boost smart and flexible technologies that keep the lights on when the wind doesn’t blow and allow consumers maximum control over their energy bills.”

WWF Scotland’s acting head of policy Gina Hanrahan

“These results are historic, with offshore wind costs blowing all expectations out of the water and halving in just over two years. We already knew that onshore wind and solar were cheaper than expensive nuclear but these results show that offshore wind is also competitive with new gas. Renewables are working and becoming a central part of our energy mix. 

It’s great to see the Moray Firth project secure a winning bid, powering close to a million homes and helping to tackle polluting carbon emissions. If we’re to see further low cost, carbon cutting offshore wind, the UK Government needs to provide a stable policy environment and a pipeline of future support contracts.”

The Renewable Energy Association’s (REA) head of policy and external affairs James Court

“These results show that renewables are now the most cost-effective form of any energy generation which can future proof both the UK grid and provide sustainable new jobs in the UK.

“Offshore wind’s success shows what can happen with government support, and consider that this auction was for so called ‘less established’ technologies, with the more mature onshore wind and solar blocked to market. Surely now is the time for the government to commit to a low carbon industrial strategy.”

SSE’s director of generation development Paul Cooley

“As a UK-based energy company, SSE is proud to be investing in much needed energy infrastructure that contributes to UK growth. With offshore wind becoming an affordable form of large-scale, low-carbon energy, we believe that the UK as a whole will benefit from these cost reductions.

“Investment in offshore wind creates opportunities to develop the wider UK supply chain and brings value to local economies and local communities. Already Beatrice Offshore Windfarm Limited has helped foster UK and Scottish supply chains for the offshore sector and has had a positive impact on local lives and livelihoods. We aim to deliver the same again through both the Dogger Bank and Seagreen offshore wind projects and hope that similar economic benefits will be replicated across the UK offshore wind industry.”

Greenpeace UK’s head of energy Hannah Martin

“This record breaking price drop from offshore wind marks a huge moment for the UK energy sector. The price of offshore wind power is 50% cheaper than just two years ago, this means we are witnessing a revolution in UK energy.

“Offshore wind already powers 4 million homes in the UK, and will power more than 8 million by 2020. It has also created jobs, regional development and export opportunities. And official polls show that 80% of people are in favour of offshore wind. The government needs to seize the opportunities of this great deal, which they themselves have helped to create.”

RenewableUK’s chief executive Hugh McNeal

“We knew today’s results would be impressive, but these are astounding. Record-breaking cost reductions like the ones achieved by offshore wind are unprecedented for large energy infrastructure. Offshore wind developers have focused relentlessly on innovation, and the sector is investing £17.5bn into the UK over the next 4 years whilst saving our consumers money.

“Today’s results mean that both onshore and offshore wind are cheaper than gas and nuclear. But this young, ambitious industry can go even further. The Government can help us by continuing to hold fiercely competitive auctions for future projects, as it has promised, and by putting offshore wind at the heart of its upcoming Industrial Strategy.”

The Aldersgate Group’s executive director Nick Molho

Larger and more efficient turbines now mean offshore wind is a mainstream component of the UK’s energy mix and turbine blade manufacturing facilities in Hull and the Isle of Wight and servicing companies around the coast are important examples of how the industry has driven jobs and supply chain growth across the UK.

“The UK is reaping the benefits of competitive auctions and stable government policy in this area. To continue to see costs reduce, a clear pipeline of projects well into the 2020s will be required and the government’s forthcoming Clean Growth Strategy must ensure that the £730m earmarked for auctions of less established technologies during the last parliament will be committed by 2020 as originally planned.”

The Green Alliance’s acting policy director Dustin Benton

“Today’s breathtaking reduction in the cost of offshore wind is great news. But the government’s response is bizarre: it has still spent less than two thirds of its budget on offshore wind, despite the fact that it is now a cheaper energy source than both gas and nuclear. The UK previously invested heavily to bring down the costs, but now that it is cheap we aren’t buying. Rather than restricting our spending, we should take advantage of a bargain and build more clean energy now.”

WWF’s head of energy and climate Gareth Redmond-King

“This is excellent news for clean power in the UK. Offshore wind is now considerably cheaper than new nuclear; coupled with other renewables & smarter systems, this should be the final nail in the coffin for the delayed and expensive Hinkley Point. Support for offshore wind from UK energy bills has helped to halve the cost of generating its electricity, whilst boosting jobs, bolstering UK economic growth and bringing down the overall cost of power generation. Onshore wind and solar already challenge fossil fuels on price, and now offshore wind joins their ranks.

“We are not far from realising a low carbon future, but we need to hear plans for the next round of auctions as part of the UK Government’s Clean Growth Plan –  and we need to see the whole strategy for cutting emissions over the next decade.”

Matt Mace

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