Offshore wind the winner in UK’s record-breaking £1.5bn renewable energy auction

FUNDING for the UK government’s next renewable energy auction has skyrocketed to £1.5bn (US$1.9bn) with the bulk of investment going to offshore wind projects.

The cash injection for the Contracts for Difference Allocation Round 6 (AR6) comes off last year’s “catastrophic” AR5, which failed to secure any bids for offshore wind.

Ed Miliband, the UK energy secretary, said: “Last year’s auction round was a catastrophe, with zero offshore wind secured, and delaying our move away from expensive fossil fuels to energy independence.”

He added: “[This auction] will restore the UK as a global leader for green technologies and deliver the infrastructure we need to boost our energy independence, protect billpayers, and become a clean energy superpower.”

The government has committed £1.1bn of the budget to offshore wind, which it calls the “backbone of the UK’s clean energy mission”.

Solar, onshore wind, and other emerging technologies will also receive a cash uplift of £230m, more than doubling its budget to £455m.

Learning from the past

Funding for AR5 was capped at £227m, and though it managed to attract bidders in the onshore, tidal, and solar sectors, it failed to obtain any offshore contracts.  

Energy leaders slammed the strike price of £44/MWh (in 2012 prices), which was considered insufficient to recoup development costs for offshore projects.

Keith Anderson, CEO of Scottish Power, said: “We need to get back on track and consider how we unlock the billions of investment in what is still one of the cheapest ways to generate power.”

Industry reaction

The record-breaking AR6 budget, with a strike price for offshore wind set at £73/MWh, has been welcomed by the renewable energy industry.

Tim Dixon, a senior consultant at independent green consulting firm Cornwall Insight, said: “The additional funding will hopefully further boost capacity levels whilst maintaining strong levels of competition.”

Doug Parr, policy director at Greenpeace UK, added: “This is an important step towards achieving the government's target of decarbonising our power network by 2030. But it needs to be followed up with an even bigger auction next year, faster grid connections, and more storage to hold the green power for when it’s needed.”

This year’s auction could generate a minimum of 4.3 GW of offshore wind and secure a total of 1.2 GW and 5.2 GW for onshore wind and solar, respectively.

Bids for AR6 should be submitted between 5– 9 August, with the winners announced in September.