UK Supports Slumping Offshore Wind Sector With 66% Hike In Auction Prices

UK Supports Slumping Offshore Wind Sector With 66% Hike In Auction Prices

The UK, which has been one of the largest offshore wind markets until now, has moved to limit the damage and recover lost ground after a series of offshore wind projects were threatened or cancelled. The projects in the UK, and other regions, notably the US, were all cancelled due to rising costs and maintainance issues that have already hurt major equipment suppliers such as Siemens gamesa as well. Even developers were not spared as Orsted, with major projects in the US has discovered in the past few months.

The UK has a target of 50 GW of offshore wind by 2030, including 5GW of floating offshore. The government has increased the strike price on tendered offshore wind projects in its renewables auction scheme by up to 66 per cent.

The new prices, ahead of the next round of auctions in 2024, seek to ensure that momentum is not lost in this clean energy category that has always been the spotlight for either its potential by supporters, or its risks, by detractors. The British government’s new  ceiling of £73/MWh for fixed bottom offshore wind projects and a really attractive £176/MWh for floating offshore wind projects should go some way in arresting the slowdown.

The maximum strike price has been increased by 66% for offshore wind, over the previously set at £44/MWh , and 52% for floating offshore wind, previously set at £116/MWh.

The government has also assured industry that offshore wind would also be given a separate funding pot in the upcoming auction round (AR6) in recognition of the high number of projects ready to participate. Offshore wind remains one of the few areas in the clean energy sector where the UK, and Europe more broadly does have a manufacturing and research leadership, vis a vis China in particular.

Wind energy, both onshore and offshore has been under a cloud in recent months, with efforts being made to support them in various ways. Considered essential along with solar in many regions as the future source of clean energy, in markets like India, even the reverse auctions process that was alleged to be leading to unviable bids has been tweaked for the sector. That has been compounded by supply chain issues in the offshore wind sector, making prices unviable for many developers who bid low,

For the British government, the first surprise might have been the cancellation of one of the world’s biggest proposed offshore wind projects, Vattenfall’s Norfolk Boreas in the UK,due to rising costs.

For countries like India, which have as yet, modest offshore wind targets (5 GW by 2030), the rising prices are a real concern, as it limits interest and will to invest further into the sector from the government. It is obvious that at least offshore wind will not be competing with say, thermal energy anytime soon, in India or elsewhere.

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Prasanna Singh

Prasanna has been a media professional for over 20 years. He is the Group Editor of Saur Energy International