A lack of offshore wind bids for the AR5 CfD auction would be the “biggest failure” in UK green energy since 2015, industry figures have said.
Various outlets have reported that no bids have been made for big offshore wind farms – in a major blow to the government’s national targets – as the government is expected to unveil the winners tomorrow.
It comes as offshore wind developers have warned that, against a backdrop of cost inflation, strike prices on offer in the Contracts for Difference (CfD) auction are too low to be viable.
NGO Greenpeace said it would be “the biggest failure for clean energy policy since 2015”.
Jamie McDonald, head of Offshore Renewables at consultancy Xodus said, if true, it “all but confirms the offshore wind industry currently faces a daunting challenge to emerge from this ‘crisis of confidence’.
“It appears that major industry players have abstained from participating, reflecting a lack of faith in the auction’s viability under the current pricing conditions.”
The £44 per megawatt hour price for this auction does not take into account other factors like inflation, the industry has argued, which impact products like steel and wage increases.
Offshore wind developers also need to content with the Electricity Generators Levy – a windfall tax – while other regions like the EU and US have generous subsidy packages.
Scottish Renewables, Renewable UK and Energy UK said in July the industry’s capacity to invest is being “eroded” and said a larger budget for AR5, currently at £205m, should be increased.
Mr McDonald said measures like withdrawal of windfall taxes on renewables, and alignment with other international support packages, like Europe’s Green Deal and the US Inflation Reduction Act, would be a “meaningful step forward”.
John MacAskill on Offshore Wind Consultants said: “I am not surprised, what happens next is what is important. In once sense once the CfD/AR trains leaves the station there is little the govt can do about it.
“We have seen a volatile 12 months, but we need to accept that, at this time, costs are higher.”
The Times reported today that five projects with a combined 5GW were eligible for the AR5 CfD auction, but their developers – Vattenfall, ScottishPower and SSE – have all given warnings over cost inflation.
Ed Smith of LCP Delta said, if firms have not made bids for offshore wind, then it could see the UK’s target of 50GW by 2030, pushed out.
“f true, that sends a strong message that 2030 offshore wind targets are looking further out of reach, but this result shouldn’t be surprising.”
Industry bosses have repeatedly warned of the need for reform to the CfD system – with strike prices no longer costs effective” amid soaring inflation.
Laith Whitwham of Aldersgate Group said: “As we’ve seen from the CfD AR5 results, the renewables sector is facing increased costs which is hampering new developments.
“More competitive CfD pricing and investment support are needed to get the sector back to where it should be.”