‘Underpowered’ Auctions Threat to UK Offshore Wind Ambitions – Energy UK

May 4, 2023, by Adnan Durakovic

Energy UK has warned that the forthcoming Contracts for Difference (CfD) auction will fall well short of delivering the expansion of offshore wind needed to hit the UK government’s 2030 50 GW target.

The CfD scheme has played a vital role in the UK’s world-leading expansion of clean energy, in particular offshore wind, driving down costs for customers while providing necessary certainty for investors in these long-term projects.

The UK government has set a target for 50 GW of offshore wind capacity by 2030 – at present there is around 27 GW in operation or in receipt of a CfD contract.

As future offshore wind developments will almost exclusively come through the scheme, that means forthcoming auctions will need to deliver another 23 GW.

However, Energy UK analysis shows that, as it stands, the scheme will fall well short of achieving this.

The long lead-in times for such projects means the extra capacity will need to come from the next three annual auctions, working out at a record 8 GW each round.

Yet the forthcoming (AR5) auction will, at best, bring forward 3.2 GW of new capacity – 4.8 GW short of the necessary amount and meaning the next round will have even further to catch up, Energy UK said.

In fact, the rising costs and other challenges facing developers of clean energy projects, highlighted by Energy UK and others over recent months, means it is likely the auction will actually bring forward even less capacity than the maximum possible.

”The introduction of annual auctions was a welcome and necessary step to accelerate the rollout of offshore wind – but that will prove futile if the auctions themselves are underpowered,” Energy UK’s Deputy Director, Adam Berman, said.

The potential shortfall of (at least) 4.8 GW would be enough to power 5.5 million homes annually and could cost customers an extra GBP 530 million a year by 2030, due to the additional need for more expensive imported gas, which would also lead to an extra 6 million tonnes of carbon emissions, according to the trade association.

”Developers are facing challenging investment conditions, but the Government simply hasn’t gone far enough in recognising the effect of higher costs in the forthcoming round,” Berman said.

”The stark reality is that without rapid Government intervention, the UK is set to fall short of our clean energy targets. As the 2030 target moves further and further into the distance it will lead to increased costs and emissions, and risk the UK falling behind in an increasingly competitive international market.”

Energy UK has called on the UK government to revisit the AR5 budget and take urgent action in order for the country to attract international investment.

”We have been a leader in offshore wind, but underdelivering on the Contracts for Difference programme will jeopardize the UK’s ability to maintain and expand our position as a clean energy superpower. We can’t afford to lose out on homegrown energy projects that will bring down bills, lower emissions, and bolster our energy security,” Berman said.