A total of 3.7GW of new renewables was allocated in this year’s auction, down 65 per cent from 10.7GW in last year’s CfD process and the lowest level seen since 2017. The enormous drop is largely attributed to zero bids coming from the offshore wind sector, where the maximum price developers could bid in this year’s auction was cut by £2 to £44 per MWh.
Industry had warned that this price was too low to reflect a widespread rise in costs for offshore wind, driven by supply chain, general inflation and interest rate pressures. However, these calls were ignored, resulting in around 5GW of offshore wind capacity sitting out the auction – enough to power nearly 8m homes a year and save consumers £2bn annually compared to the cost of electricity from gas. The response from industry, environmental groups and the opposition bench has been scathing.
“Industry has warned that rising costs should have been properly priced into this auction,” said RenewableUK CEO Dan McGrail. “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.
“Renewables don’t only enable us to fight climate change, they also help to drive economic growth, creating jobs and supporting supply chains across the UK. This result for offshore wind means putting economic growth on hold, with over £10bn in investment and thousands of jobs delayed.”
Ed Miliband, Labour’s Shadow Energy Security and Net Zero Secretary, labelled the failing an ‘energy security disaster’ and highlighted the cost impacts it would have for bills.
“The news this morning is an energy security disaster and a £1 billion Tory bombshell that will push bills up for hardworking families,” he said. “The Conservatives have now trashed the industry that was meant to be the crown jewels of the British energy system - blocking the cheap, clean, homegrown power we need. Ministers were warned time and again that this would happen, but they did not listen.”
The auction secured 1.9GW of solar at £47.00 per megawatt hour and 1.5GW of onshore wind capacity at £52.29/MWh, as well as 53 megawatts (MW) of tidal power at £198.00/MWh. The new projects will come online from 2025 onwards. However, the 3.7GW total marks a 65 per cent year-on-year fall in new renewables capacity, labelled by Greenpeace as a ‘failure’ and ‘disaster’.
“This monumental failure is the biggest disaster for clean energy in almost a decade,” said Greenpeace UK’s policy director, Doug Parr. “Thanks to cost pressures and inept government policy, this auction round has completely flopped - denying bill payers access to cheap, clean energy and putting the UK’s legally binding target of decarbonising power by 2035 in greater jeopardy. It leaves the UK more dependent on expensive, imported fossil gas.
“Offshore wind is one of the cheapest and cleanest forms of power there is, but in an effort to save consumers pennies on their energy bills, the government is costing them pounds. We need urgent reforms to the way these contracts are awarded and smart changes in government policy to unlock private investment and remove planning bottlenecks. If they don’t, the new renewables - which are essential for lowering bills, increasing energy security and slashing emissions - simply won’t get built.”