The outcome of the UK’s latest Contracts for Difference (CfD) auction round 5 has raised concerns about the acceleration of renewable energy projects, particularly offshore wind.
This marks the first time since the launch of CfDs in 2015 that no new offshore wind projects have been announced.
Urgent action to restore investor confidence
Renewable energy industry body RenewableUK has issued a call for swift government action to restore investor confidence in the UK market after a recent clean power auction fell short of expectations.
It said this shortfall risks undermining the country’s energy security targets and the growth potential of offshore wind, a vital sector for the UK’s future.
RenewableUK Chief Executive Officer Dan McGrail expressed concerns about rising costs not being adequately considered in the auction and urged the government to demonstrate its commitment to offshore wind.
Ana Musat, RenewableUK’s Executive Director for Policy and Engagement, called for investable parameters in the next auction and a comprehensive strategy to maximise the offshore wind sector’s potential, including evolving the CfD, supporting supply chain growth, and creating a competitive fiscal regime.
Major blow
Claire Mack, Chief Executive of Scottish Renewables, emphasised the industry’s repeated warnings about escalating costs and growing challenges for developers.
Ms Mack said: “Today’s results are a major blow and should serve as an indication that urgent reform is needed. Every megawatt of renewable energy which isn’t built right now prolongs our dependence on generation using expensive imported gas, which costs consumers money.
“It’s also bad for Scotland’s energy supply chain, which is trying to transition from oil and gas to renewables and desperately needs a steady stream of projects to make their own investments in skilling up and new technology.”
Major setback
Simon Virley, Vice Chair and Head of Energy and Natural Resources at KPMG described this development as a major setback.
Mr Virley said: “The lack of new offshore wind projects in the UK CfD auctions is a major setback at a critical time when we should be looking to accelerate renewables.
“After record-breaking rounds in previous auctions, this is the first time since CfDs launched in 2015 that there have been no new offshore wind projects announced and will call in to question the government’s target of 50GW by 2030 and the ambition to get to a net zero power system by 2035.
“This outcome reflects the growing inflationary and supply chain pressures affecting the offshore wind sector in recent years, which is making it harder to deliver these projects at the strike prices and other auction parameters set by the government.
“The government will need to review urgently these parameters ahead of Auction Round 6, if it wants the British success story on offshore wind to continue.”
Biggest disaster in almost a decade
In response to the results, Doug Parr, Policy Director at Greenpeace UK, expressed deep concern, calling it a “monumental failure” and “the biggest disaster for clean energy in almost a decade.”
Parr attributed this outcome to cost pressures and government policies, which he argued have hindered the auction round’s success.
Doug Parr said: “We need urgent reforms to the way these contracts are awarded and smart changes in government policy to unlock private investment and remove planning bottlenecks. If they don’t, the new renewables – which are essential for lowering bills, increasing energy security and slashing emissions – simply won’t get built.”
