'Race to the bottom' Britain risks offshore wind flop, Shapps warned - Recharge

'Race to the bottom' Britain risks offshore wind flop, Shapps warned | Recharge

Major UK energy bodies are demanding “urgent changes” to renewables auctions to end what they claim is a “race to the bottom” that is harming offshore wind growth, and warn the latest round risks failure.

RenewableUK, Energy UK and Scottish Renewables want British energy security and net zero secretary Grant Shapps to alter the way contract-for-difference (CfD) power deals are awarded, claiming they focus too much on securing lowest power prices.

That has led to massive pressure on supply chain players that is threatening the industry’s ability to deliver projects, the bodies warned Shapps.

“The current emphasis on securing renewable capacity at the lowest possible strike price – minimising expenditure rather than maximising benefit – risks creating a less attractive investment environment in the UK.

“The race to the bottom on strike prices incentivised by the current auction process is at odds with the reality of project costs and investment needs, jeopardising deployment targets. This is especially relevant for supply chain companies that have been recording losses as the continuous squeeze on strike prices has been passed on to them.”

The industry groups also want the UK government to increase the pot of money available for the latest CfD auction round, known as Allocation Round 5 (AR5), from the current £205m ($261m), amid warnings that the tender could flop otherwise.

“Since it was announced in March, a number of new projects have become eligible to bid. The budget for fixed-foundation offshore wind alone would need to be at least two and a half times higher than its current level to maximise the capacity which could now be secured in this year’s auction.”

The CfD has been credited with helping propel the UK to a leading position in global offshore wind, with almost 14GW in place and second only to China, but is currently the subject of a review by the government that could see more criteria not related to price included in deciding winners.

The AR5 winners are expected to be announced in September.

Andrew MacNish Porter, policy manager at Scottish Renewables, said: “The CfD scheme has played a key role in renewable energy being the cheapest form of electricity in the UK. Building on this success, the renewable energy industry is poised to make significant investments in projects with the potential to deliver economic growth and create thousands of high-skilled jobs across the UK.

“However, the latest CfD has failed to account for an increasingly challenging economic environment and there is a real risk that this summer’s auction will fail to secure this much needed industry investment.

“We urge the government to reassess the parameters of this year’s auction immediately as well as consider longer term reforms to ensure the CfD delivers maximum value for the UK economy as we continue our transition to net-zero.”