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Britain’s plans to develop clean energy have suffered a major blow after the government failed to attract offshore wind developers to sign up for the latest round of contracts for new projects.
No offshore wind projects have won contracts in this year’s annual subsidy auction after developers warned the government had not provided enough support to offset rising costs, according to results released on Friday.
The government’s plan to more than triple offshore wind capacity to 50 gigawatts by 2030 to help meet a legally binding net-zero carbon emissions target by 2050 is a major setback.
Keith Anderson, chief executive of offshore wind developer Scottish Power, said “the economics (of this round) were simply not good” and the result “set alarm bells for the government”.
He added: “We need to get back on track and consider how we can unlock billions of dollars of investment in what remains one of the cheapest ways to generate electricity and meet the UK’s future long-term offshore wind ambitions.”
Labour’s shadow climate secretary Ed Miliband said the result was an “energy security disaster” and accused the Conservatives of “undermining an industry that should be the crown jewel of the UK energy system”.
Renewable energy projects in the UK are supported by a system of so-called contracts for difference, in which the government agrees to guarantee developers a fixed price for the electricity sold by projects it is developing.
But developers have warned that top bids for these contracts this year will not be enough to start offshore wind projects. The industry has been grappling with rising labor and turbine costs, as well as high interest rates.
In July, Swedish developer Vattenfall halted construction on its mega Norfolk Boreas project off the Norfolk coast, saying the price it had agreed with the government last year was too low to cover a cost rise of up to 40%.
Industry trade group RenewableUK said the government needed to take “urgent action” to “rebuild investor confidence in the UK market”.
Offshore wind projects eligible for this year’s round “could power nearly 8 million homes a year and save consumers £2bn a year compared to the cost of electricity from gas”, the company said.
Dan McGrail, chief executive of RenewableUK, said: “These results should be a wake-up call for the government, as the UK’s energy security and net-zero emissions targets can only be achieved if offshore wind power is the backbone of the future energy system.”
Offshore wind has so far been a success story in the UK, the world’s second largest offshore wind market after China, which will supply around 11% of the country’s electricity by 2021.
For the first time, the government highlighted contracts awarded in auctions for solar and onshore wind projects, as well as geothermal projects, calling the 95 contracts a “record figure”.
However, RenewableUK noted that the total capacity allocated was 3.7GW, the “lowest level since 2017”, and just over a third of the capacity allocated last year.
Energy and Climate Change Secretary Graham Stewart said: “This year’s record-breaking funding round builds on the government’s multi-year growth in renewable energy.
“Offshore wind is central to our goal of decarbonizing our electricity supply . . . we will work with industry to ensure we remain a global leader in this important technology.”
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