Industry bodies have voiced concern and disappointment over a total lack of bids from offshore wind developers in the latest UK renewable energy auction.
Halfway down a press release trumpeting the government’s ‘record number of renewables projects awarded government funding’, the Department of Energy Security admits that ’offshore and floating offshore wind do not feature in this year’s allocation’.
“This is in line with similar results in countries including Germany and Spain, as a result of the global rise in inflation and the impact on supply chains which presented challenges for projects participating in this round,” it says.
For this year’s auction, the government set a maximum price of £44 (€51) per MWh, and it seems that was not high enough to attract bids in view of the soaring supply chain costs faced by contractors.
The lack of bids comes after revelations that Vattenfall had axed a 1.4GW offshore wind farm off the English east coast after recording a loss of €480 million.
Vattenfall confirmed its decision in an earnings report, in which it said ‘the offshore wind power project Norfolk Boreas in the UK gave rise to a negative impact on earnings of SEK5.5 billion (€480 million)’.
“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,” said Richard Sandford, co-chair of the Offshore Wind Industry Council. “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. So, lessons must be learned to ensure that the parameters of the auction are set correctly in the future.”
Industry body RenewableUK said rising costs had been ignored when pricing the auction.
“If the UK isn’t offering prices that allow investors to make a return, they will simply invest elsewhere.” said CEO Dan McGrail. “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.”
“The government is already gearing up for the sixth round of auctions in 2024 - which will be the second annual auction - and looks forward to future participation of offshore and floating offshore wind,” the press release says, calling the industry ‘a British success story’ that was home to the world’s four largest operational wind farms.
The UK is not the only European country that appears to be having doubts. In July, Reuters reported that Orsted had pulled out of a German offshore wind auction, and in February, Denmark put new offshore wind projects on hold.
