The government’s green energy ambitions have taken a hit as no companies participated in an auction for contracts to operate new offshore wind projects, prompting concerns about rising household energy costs. While successful bids were made for onshore wind, solar, tidal, and geothermal projects to contribute electricity to the grid, there were no takers for offshore turbines, which play a crucial role in the UK’s renewable energy system.
Insiders had previously warned that the lack of interest in the offshore wind contracts was due to the government’s imposition of a maximum price for generators, which was perceived as too low. This pricing failed to account for the increasing expenses associated with manufacturing and installing wind turbines. The industry has been grappling with inflation, resulting in a 40% increase in steel prices, supply chain challenges, and higher financing costs.
This year, offshore wind producers could bid a maximum of £44 per megawatt hour (MWh) of electricity, a significant decrease from the £155 per MWh in 2015, when adjusted for inflation. The outcome of the auction is a setback to the government’s promise to deliver 50 gigawatts (GW) of offshore wind energy by 2030, up from the current 14 GW. Energy and climate change minister Graham Stuart expressed disappointment regarding the offshore wind segment but reaffirmed the government’s commitment to achieving its offshore wind capacity goals.
Despite the fact that offshore wind energy is now more cost-effective than gas power plants, experts warn that the failure to expand this sector could lead to higher energy bills, compromise the country’s energy security, and jeopardize the UK’s position as a global leader in the renewable energy industry.
Keith Anderson, the CEO of ScottishPower, a major player in the UK wind power sector, characterized this outcome as a missed opportunity to provide affordable energy to consumers and called it a wake-up call for the government. Labour’s Ed Miliband criticized the result, branding it an “energy security disaster” that would drive up household energy costs. Greenpeace UK’s policy director, Doug Parr, labeled it the “biggest disaster for clean energy in almost a decade,” emphasizing that it could undermine the UK’s legally binding target of decarbonizing power by 2035.
Luke Murphy of the IPPR think tank expressed disappointment in the government’s policy and planning, asserting that this failure would result in missed green investments, higher energy bills, increased emissions, and a damaged reputation as a clean energy leader.