In a boost to offshore wind developers, the government has announced an increase in the maximum price renewables projects can receive in the next renewable energy auction.
Having undertaken a review of extensive evidence, including the impact that global events have had on supply chains, it decided to lift the maximum price for the likes of offshore wind and other renewables projects in the next Contracts for Difference (CfD) allocation round – AR6 – due to take place next year.
This will now mean offshore wind projects will benefit from a 66% increase in the maximum strike price, lifting it from £44/MWh to £73/MWh, while floating offshore wind will see a 52% rise, climbing from £116/MWh up to £176/MWh.
AR6 will also see offshore wind given a separate funding pot in recognition of the “high number” of projects ready to participate and help to deliver on the government’s ambition for 50GW of offshore wind by 2030.
There is hope, too, that these developments could reignite work on the Norfolk Boreas windfarm, according to a recent BBC report. Vattenfall called off the project in the summer, citing cost increases of up to 40% because of high inflation and interest rates, rendering the offshore wind sector and its supply chain vulnerable. Kevin Keable, Chief Executive of the East of England Energy Group, commented: “This is the sort of thing that we hope will kickstart this important project again. That would have a really positive effect on jobs and skills in the region as well as benefit the hundreds of companies who are part of the supply chain.”
Interim UK Country Manager, Lisa Christie, described the announcements from the government as a “very positive signal” which showed it had understood the current market situation and wants to attract investment to ensure projects are being built. Christie continued: “Offshore wind will be the backbone of the energy transition across Europe and the long-term energy outlook for the market remains strong.”
Other renewable projects are benefiting from an increase in their strike prices, with geothermal energy’s being boosted by 32%, lifting it from £119/MWh to £157/MWh, solar power’s increasing by 30%, rising from £47/MWh to £61/MWh, and tidal energy’s by 29%, seeing it go from £202/MWh to £261/MWh.
In a bid to further shape the scheme for the better moving forwards, the government has published a consultation seeking views on how Sustainable Industry Rewards could be included as part of the 2025 auction process. This would mean offshore wind and floating offshore wind companies could receive additional payments if able to cut carbon emissions in their supply chains or improve their social benefits, such as investing in high-skilled jobs, using more environmentally friendly factories to assemble components, or investing in manufacturing facilities or skills in deprived areas.
