Offshore wind 'back on track' as UK awards support for 9.65 GW new renewables

The UK’s sixth allocation round of Contracts for Difference has awarded support to 9.65 GW of new renewables, more than double last year's round after the government increased the AR6 budget, the Department for Energy Security and Net Zero said Sept. 3.

The awards included CFDs for 4.94 GW of conventional offshore wind and 3.3 GW of solar PV. The auction also supported 990 MW of onshore wind and, at 400 MW, what would be the world’s largest floating offshore wind farm project to date.

Strike prices for offshore wind of GBP54.23/MWh ($71.17/MWh, re-bid) and GBP58.87/MWh (new) were considerably below the government’s increased bid ceiling of GBP73/MWh (all 2012 prices).

"This auction has produced a record number of solar projects bolstering our mission for a solar revolution, we have powered forward with onshore wind, secured the largest commercial floating offshore wind project in the world and got the offshore industry back on its feet," said Energy Secretary Ed Miliband.

In new offshore wind, Hornsea 4 (Orsted, 2.4 GW) and East Anglia 2 (963 MW, ScottishPower Renewables) were awarded CFDs at GBP58.87/MWh.

This translates to around GBP82/MWh in today's prices.

Platts, part of S&P Global Commodity Insights, assessed the GB offshore wind capture price at GBP55.78/MWh Sept. 1.

Of projects allowed to rebid up to 25% of capacity allocated support in AR4, Orsted’s Hornsea 3 (1,080 MW), Scottish Power’s East Anglia 3 (158.9 MW), Moray West (73.5 MW, Ocean Winds) and Inch Cape (266.11 MW, ESB, Red Rock) were all awarded CFDs at GBP54.23/MWh.

Green Volt’s floating wind project off the Aberdeenshire coast cleared 400 MW at a price of GBP139.93/MWh. Developers Flotation Energy and Vargronn aim for the asset to be operational in 2029.

"Offshore wind prices are lower than we expected with clearing prices going below GBP60/MWh (2012 real) and at GBP80-85/MWh in nominal terms, albeit assumed returns are heavily dependent on capex costs," said analysts at Royal Bank of Canada.

Solar PV clearing prices "moved up slightly from GBP47/MWh in the previous auction, whilst for onshore wind prices fell slightly from GBP52.29/MWh," RBC said.

Pressure builds

Tom Glover, RWE UK Country Chair, said that at 3.4 GW, "today’s round only procured 35% of the total eligible pipeline of new offshore wind projects. If the government wants to deliver on its target to quadruple offshore wind to 60 GW by 2030, it will need to significantly ramp up procurement."

He urged the government to review and confirm the parameters for next year’s CFD auction, "and ensure it takes place as planned next summer."

The AR6 result piled pressure on future rounds to deliver larger tranches of offshore capacity, the state-funded innovation hub ORE Catapult said.

“Over the next three years, there must be rapid consenting and large-scale deployments of offshore wind. Reaching 60 GW by 2030 would require an average awarded capacity of 10.6 GW delivered in the next three ARs, or parallel methods of additional deployment from novel initiatives such as megaprojects," it said in a blog.

AR6 strike prices were in line with other recent auctions globally and reflected the dual impacts of inflation and financing costs due to high interest rates, said sector association RenewableUK.

"There is intense global competition in offshore wind and the next auctions will be crucial for the UK," said RenewableUK’s CEO Dan McGrail.

The UK has awarded support contracts to nearly 25 GW of fixed-bottom offshore wind capacity across all auctions. It has 15 GW in operation.