Key events
Sam Richards, founder and campaign director of Britain Remade, says the government was complacent and incompetent for failing to heed industry warnings that the cost of offshore wind turbines had jumped sharply:
“The failure to award a single contract for offshore wind in the latest round is the direct result of the Government’s complacency and incompetence in the rules they set for the latest auction. This catastrophic outcome will cost hard-pressed billpayers £1bn a year.
“Ever since the Contracts for Difference system was introduced in 2014 industry has driven down costs at every single auction round – to the point that, for a time, offshore wind farms were 9 times cheaper than new gas plants.
Yet because of the war in Ukraine the costs of core materials used in offshore turbines such as steel, aluminium and copper have skyrocketed, as they have for businesses across the economy.
Despite this, Ministers and mandarins decided to ignore warnings from the industry that this would mean, for a short time, the cost of offshore wind would rise – while still being significantly cheaper than new gas plants.
“By capping the price the sector could bid at too low, Government set it at a level that made it impossible for investors to meet their costs. This will condemn consumers to higher bills than necessary and means Britain loses out on vital jobs and billions in investment.
“At the same time as the Government capping the price at an unrealistic level, ministers have also failed to deliver the necessary planning reforms that will speed up delivery and cuts costs. It cannot be right that it takes up to 13-years to build an offshore wind farm, when construction takes only 2 years.”
The failure of the UK government’s auction for offshore wind to attract any bids is the latest sign of trouble in an industry that’s crucial to meeting net zero goals.
So says Bloomberg’s energy correspondent, Javier Blas, who explains:
Only 3.7 gigawatts of fresh projects cleared in the government’s fifth auction round for new renewables, marking a huge drop from the almost 11 gigawatts that were given contracts in last year’s allocation round.
The main reason for the huge fall in new capacity was the lack of offshore wind, which is facing rising financing and supply chain costs.
Greenpeace: it’s a monumental failure
Greenpeace says today’s “failed renewables auction” is the biggest disaster for clean energy in almost a decade, and will put the UK’s decarbonisation target in jeopardy.
Greenpeace UK’s policy director, Doug Parr, said:
“This monumental failure is the biggest disaster for clean energy in almost a decade. 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.”
Concern in Wales over wind auction flop
Steven Morris
There is concern and disappointment in Wales over what the offshore wind auction flop means for Erebus, the planned floating windfarm off Pembrokeshire, my colleague Steven Morris reports.
Plaid Cymru’s environment spokesperson in Westminster, Ben Lake, said:
“Today’s news is deeply disappointing. The Erebus project is the first of its kind in Wales, and would have paved the way for further offshore wind developments, helped to lower energy bills, and make an important contribution to the economy of southwest Wales.
“Despite repeated warnings from the industry, the UK government failed to factor rising costs into the auction process, making this flagship project less competitive. The Irish government, on the other hand, ran their auction in May with a framework that recognised current supply chain costs and secured investment in four offshore wind farms. Wales is losing to Ireland due to the UK government’s poor planning.”
The director of RenewableUK Cymru, Jess Hooper, said:
“As Wales’ first floating offshore wind project, Erebus is entirely dependent on this form of revenue support to succeed, and the success of Erebus is critically important not only to Wales and the wider south west region, but also for the UK government’s own floating offshore wind targets.
This result will now delay investment decisions for developers, supply chain companies, ports and infrastructure, all with knock-on effects.”
ScottishPower: It’s a multi-billion pound lost opportunity
ScottishPower, which operates several offshore wind projects off the UK coast, has revealed it did not submit any bids to the contract-for-difference (CfD) support scheme.
Keith Anderson, ScottishPower CEO, says today’s auction results is “a multi-billion pound lost opportunity” to deliver low-cost energy for consumers, and also “a wake-up call for Government”.
Anderson adds:
“The CfD process is recognised globally as a lynchpin of the UK’s offshore success, but it also needs to flex to keep pace with the world around it.
We all want the same thing – to get more secure, low-cost green offshore wind built in our waters. ScottishPower is in the business of building windfarms and our track record is second to none in terms of getting projects over the line when others haven’t been able to. But the economics simply did not stand up this time around.
“We need to get back on track and consider how we unlock the billions of investment in what is still one of the cheapest ways to generate power and meet the UK’s long-term offshore wind ambitions for the future.”
Ed Miliband is now telling Radio 4’s Today Programme that today’s news is an “absolute disaster for Britain”, and an “absolute condemnation of the government’s energy policy”.
He adds:
They are trashing the crown jewels of our energy system, and it was all totally avoidable.
Miliband explains that failing to increase the guaranteed price for offshore wind projects, to recognise increased costs, was a “totally self-defeating false economy”; it will mean the UK uses more imported gas instead.
Labour: this is an energy security disaster
The Labour party say the news that no offshore wind projects were successful in the Government’s latest auction for renewables support is an “energy security disaster”.
Ed Miliband MP, Labour’s Shadow Energy Security and Net Zero Secretary, says ministers failed to heed warnings that the guaranteed price offered for electricity by the government was too low.
“The news this morning is an energy security disaster and a £1 billion Tory bombshell that will push bills up for hardworking families. 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. They simply don’t understand how to deliver the green sprint, and Rishi Sunak’s government is too weak and divided to deliver the clean power Britain needs.
“This is just the latest episode in the Tories’ 13 years of failed energy policy: they broke the onshore wind market, they undermined the solar industry, and they caused chaos with botched home insulation. Every family and business are paying the price for these failures in higher energy bills, and our country remains exposed.
“Only Labour can get Britain building and deliver the clean energy we need to cut bills and make the UK energy secure, with our plan for clean power by 2030.”
Goverment: record number of renewables projects supported
Despite today’s failure to award support to any offshore wind projects, the government says a “record number of renewables projects” have been awarded Government funding today.
The Department for Energy Security and Net Zero says 95 new projects have been awarded funding from its renewables scheme.
They will deliver 3.7GW of clean homegrown energy, enough to power the equivalent of two million homes.
That include onshore wind, solar, and tidal, they say, “helping to grow the economy and increase UK energy security”.
Energy and Climate Change Minister Graham Stuart said:
“We are delighted that our first annual Contracts for Difference auction has seen a record number of successful projects across solar, onshore wind, tidal power and, for the first time, geo-thermal.
But what about the failure to award any contracts to offshore wind?
Stuart says the government will ‘work with industry’, to hit its offshore wind goals:
“Offshore wind is central to our ambitions to decarbonise our electricity supply and our ambition to build 50GW of offshore wind capacity by 2030, including up to 5GW of floating wind, remains firm.
The UK installed 300 new turbines last year and we will work with industry to make sure we retain our global leadership in this vital technology.
The Department for Energy Security and Net Zero says inflation, and supply chain problems, led to no contracts being awarded to offshore wind contracts this morning:
While 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.
Introduction: UK offshore wind auction flops
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Britain’s clean energy ambitions have been dealt a painful blow this morning, as a subsidy auction to support new renewable energy projects awarded no contracts for offshore wind projects.
Critics are calling the flop the biggest clean energy policy failure in almost a decade.
So what went wrong with the UK’s flagship renewables scheme? Industry insiders say ministers failed to heed warnings that they had set the auction prices too low, failing to adjust for the soaring costs faced by renewable energy developers when they build offshore wind.
The auction uses a mechanism known as contracts for difference, which guarantee consumers will pay a fixed price for the energy generated by the bidder. When wholesale prices are lower, subsidies added to customer bills top up the difference; when wholesale prices are higher, developers backpay the difference.
That fixed cost, though, appears to have been set too low to attract bids, meaning the government’s target of reaching 50GW of offshore wind by 2030 could be in jeopardy.
Contracts have been awarded for onshore wind, solar, geothermal and tidal stream projects, data released by the government shows.
But the failure to award offshore contracts will damage Rishi Sunak’s plans to meet climate targets and drive down energy bills, just as the prime minister flies to India for the G20 leaders summit.
My colleague Jillian Ambrose reports:
Nearly all the biggest offshore wind developers in the UK were forced to sit out of the bidding after ministers refused to increase the maximum price for the auction, despite a 40% increase in the cost of manufacturing and installing turbines due to inflation.
The government’s failure to secure more than one/two offshore wind farms was described by Greenpeace as “the biggest disaster for clean energy policy in the last eight years” because it risks jeopardising the UK’s plan to triple its offshore wind power capacity by 2030, and casts doubt on Britain’s climate targets.
Renewable energy developers submitted sealed bids in the auction in the first half of August; the most competitive proposals were then ranked, with contracts awarded to projects offering the lowest cost to energy-bill payers.
But there had already been warnings that firms would need to receive higher maximum prices, after rising costs forced Vattenfall to cease working on the multibillion-pound Norfolk Boreas windfarm.
We’ll have full reaction to the auction results shortly
The agenda
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7am BST: German inflation report for August
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1.30pm BST: Canadian employment report for August
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5pm BST: Russian inflation report for August
