New wind power developments may be back on the table after a government acknowledgment of the rising costs for the offshore industry.
After months of industry pressure, and an auction round for the next generation of wind farms that failed to attract a single bid for offshore wind, the government announced
last week that it was to increase the so-called ‘contract for difference’, the guaranteed minimum price for wind produced by the new developments, by a whopping 66%.
The news came in the same week that major offshore wind developments off both Norway and Sweden were put in doubt, with developers threatening to walk away from the projects if recent increases in prices are not factored into their own contracts.
Announcing the measure, UK energy security secretary Claire Coutinho said: “We recognise that there have been global challenges in this sector, and our new annual auction allows us to reflect this.”
The new price guarantee has been increased from £44 per MW/h to £73. This price will still make offshore wind a relatively cheap option in the energy mix planned to support a transition to net zero, beaten only by onshore wind and large-scale solar farms.
Offshore wind, according to government statistics, provided 13.8% of the UK’s overall electricity in 2022, despite issues with the National Grid that have prevented the full potential of the turbines already installed at sea from being utilised.
Government targets in the transition to net zero, however, were dealt a huge blow in September, when the offshore wind sector boycotted the next round of bidding, saying that the price guarantees made future development unprofitable. Government plans had envisaged offshore wind production nearly quadrupling from 13GW to 50GW by 2030.
Wind power companies told the government that to hit the 2030 target, 6GW to 8GW of power will need to be installed every year for the next five years, at a time when price inflation for the materials, labour and infrastructure required to install the turbines has reached 40%.
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