Auction fails to secure bids for offshore wind farms

No new offshore wind farms are expected to have been bid for in a government auction this week, in a significant blow to the government’s clean energy ambitions.

Ministers are scheduled to announce tomorrow the winners in their annual auction of financial support contracts for renewable energy projects.

A number of sources have told The Times they understood the auction had failed to procure any big new offshore wind farms, after the government ignored repeated industry warnings that support on offer was too low to reflect soaring inflation.

Such an outcome would jeopardise the government’s ambitious target of more than tripling offshore wind capacity to 50 gigawatts by 2030 — more than enough to power every home, and up from less than 14 gigawatts today.

Five offshore wind projects with about 5 gigawatts combined capacity are believed to have been eligible for this year’s auction — enough to power more than 5 million homes. However, their developers — Vattenfall, ScottishPower and SSE — have all sounded the alarm over cost inflation.

The contracts offer developers valuable revenue certainty by guaranteeing that consumers will pay a fixed price for the electricity they generate. When wholesale prices are lower, consumers pay subsidies to top up the difference; when wholesale prices are higher, developers back pay the difference.

The price required by offshore wind farms has plummeted over the past decade and recent contracts have been below prevailing wholesale power prices. However, developers say supply chain cost inflation of up to 40 per cent means they need a modest increase in prices once more. The government has declined to increase the maximum price on offer for offshore wind, even though it would still be significantly cheaper than gas-fired power plants.

A spokesman for the department for energy security and net zero said: “We remain committed to further increasing our use of renewables, including offshore wind, to meet our net zero targets and decarbonise our electricity sector by 2035.”