The latest Contracts for Difference (CfD) auction has seen the UK’s offshore wind industry smash record low prices for delivering electricity.
With projects set to be delivered for as low as £39.65/MWh, around 30% lower than the second auction held in 2017, the auction has caused a stir amongst the sector.
Frank Gordon, Head of Policy at the Renewable Energy Association (REA) said the announcement was a “landmark moment” and a “great achievement” for the industry as offshore and remote island wind offer clean energy below the projected wholesale cost of electricity.
He added: “We must recognise this success and the support that has got us there, however, we must also acknowledge that one type of technology is the primary beneficiary of this support. The Committee on Climate Change’s (CCC) Net Zero report stated that a combination of renewable technologies are needed to eradicate fossil fuels from the energy mix and to reach net zero by 2050; for this to happen, the government must ensure a fair and inclusive route to market for all technologies.
“For example by reinstating a reserved capacity for wave and tidal technologies and advanced conversion technologies, that can deliver added Industrial Strategy benefits to the country by virtue of being largely manufactured and developed in the UK.”
Falling costs must not affect working conditions
Sue Ferns, Prospect Senior Deputy General Secretary, said: “The continuing fall in the price for renewables is welcome and essential if we are to reach an energy mix which allows us to achieve our goal of net zero as quickly as possible. But we mustn’t allow the headline strike price to distract from the flaws in the current system of financing and subsidy across the whole generation market.”
She stressed the current system loads much of the burden of paying for future capacity on the consumer, which she warned could be counterproductive in the long run.
Ms Ferns added that any fall in cost must not come at the expense of working conditions or wages and emphasised the industry must maintain its current high standards and professionalism.
A very welcome announcement
Carbon Trust said it welcomes the announcement of the CfD Round 3 strike prices, which highlight the “rapid cost reduction journey” that has continued from CfD Round 2. It said offshore wind will provide vital support for the UK to reach its renewable energy targets, with the CfD projects alone powering seven million homes with cheap and clean energy.
It stated: “This is an important milestone, which will help move the UK offshore wind sector further towards the CCC’s recommendation of 75GW energy from wind by 2050 but there is still much to be done. We are looking forward to supporting our partners, the Offshore Wind Accelerator offshore wind developers, in delivering these record-breaking projects.”
Net zero cannot rely on renewables alone
Tom Greatrex, Chief Executive of the NIA noted: “Early offshore wind farms are generating at around £150 per megawatt hour but these latest figures show what is possible as a result of a sustained build programme.
“However, as the CCC and many others have said, to meet net zero we cannot rely on variable renewables alone but a portfolio of technologies including nuclear power. To decarbonise our power supply, as the renewables industry body has also acknowledged, will need every low carbon tool in the box.”
He added that learnings and efficiencies will see the cost of nuclear power fall in the near-future, adding that nuclear has the potential to stabilise the energy system and bring investment and prosperity to both urban and rural regions of the UK.
Lawrence Slade, CEO of Energy UK, said: “Today’s exceptionally low results are tremendously exciting, on a day of global climate action, and shows just what can be done right now. The cost of clean energy is continuing to fall, and the move to a low carbon future is being delivered at the lowest cost to consumers.
“This shows what can be achieved by providing the necessary certainty for investment, which drives down the cost of decarbonisation, benefits customers and the wider economy, and creates highly skilled jobs and stimulates growth in rural economies.
“The industry has shown it can deliver – with over a third of electricity generation now provided by renewables. We now need the Government to set out a long-term policy framework to deliver on the newly legislated target of net-zero emissions at 2050.”