A 66 per cent increase in the crucial strike price for offshore wind subsidy has been welcomed by key figures behind major pipeline projects in the Humber.
Following a no-show from the sector in the fifth allocation round, an ”extensive review” has been held, with a hike to cover inflation across the supply chain. The bid level will now increase from £44/MWh to £73/MWh. A separate funding pot for offshore wind will also be established, with a £960 million commitment to a Green Industries Growth Accelerator, also emerging.
While no bids had been anticipated from the Humber back in the summer, several are emerging, with the uplift seen as vital.
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Tom Glover, RWE’s UK country chair, is overseeing the dual Doger Bank South developments as Sofia is built out. Grimsby is set to be the base for all. He said: “RWE welcomes the Government's decision, and its recognition of broader international global supply chain and inflationary cost pressures within the clean energy sector. We also welcome the decision to revert to a separate allocation pot for offshore wind which should help to secure future capacity towards the UK's 50GW by 2030 target.
“The timely and efficient deployment of renewables remains the lowest cost and best way of achieving the UK's domestic energy security as well as net zero. This represents a positive step towards maximising the UK's clean energy potential for ensuring sustained lowest prices for consumers and creating good quality jobs beyond this. Reference prices and budget levels now hold the key as to how much capacity is procured during the next auction and in support of the government's deployment ambitions, and we will await further news on this.”
Duncan Clark, Orsted’s lead executive in the UK, had warned Hornsea Three could be put on hold due to soaring prices earlier this year. It should be the next wind farm in the world-leading zone operated and maintained from Grimsby. He said: “We welcome this important and positive step towards getting the next auction round right, which is essential for both UK energy security and the wider supply chain. This is a clear indication from government that offshore wind can and will be the backbone of our future energy mix – providing low-cost, low-carbon electricity, creating jobs, supporting communities and attracting investment into the UK.”
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The parameters were set out by the Department for Energy Security and Net Zero for next year’s auction, set to open in March.
Dan McGrail, chief executive of trade body RenewableUK, said: "Ensuring that the UK continues to unlock investment in renewables is critical to improve Britain's energy security, drive economic growth, support thousands of new green jobs and enable us to continue to create a lowest cost electricity system for billpayers. With intense international competition for investment in renewables, we welcome the strong commitment to the sector shown by Government, which demonstrates that the UK is intent on remaining a global leader in offshore wind, as well as innovative technologies like floating wind and tidal stream.
"There is the potential for the Government to attract a record level of private investment in offshore wind projects next year, with at least 10 projects likely to be eligible, able to power 8.5 million homes each year and reduce the UK’s need for gas by 39 per cent. The framework they’ve set out is a significant step forward in securing this. Although renewables haven’t been immune from the recent rises in financing and supply chain costs which all major infrastructure projects have faced, they remain the lowest cost means of generating new electricity. Even at these new prices, there is still no cheaper way to meet the UK's rising electricity demand and increase our energy security."
For floating offshore wind projects, the cap moves up from £116/MWh to £176/MWh. So far Humber projects have purely focused on monopile-based construction, due to the relative shallow waters of the North Sea.
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. This is a vital part of our plan to have enough homegrown clean energy, bringing bills down for families and strengthening our energy independence."
Energy Minister and Humber MP, Graham Stuart, added: "Last year’s Contracts for Difference scheme saw more than 90 clean, homegrown energy projects and we have shown our ongoing commitment to retaining our global leadership in renewable energy. This critical update to the scheme’s design provides further clarity and confidence to the offshore wind sector and ensures the scheme remains competitive for renewable developers investing in new low carbon technologies.
"I look forward to securing another year of successful contracts in 2024, creating skilled jobs, reducing emissions and delivering maximum amounts of reliable clean energy for the British public."
Fellow minister, Lord Callanan, had told how lessons were being learned from the last CfD round on his visit to the Humber last month.
