The government plans to increase subsidies for new offshore windfarms in order to meet its green energy goals, as developers face challenges with increased costs in the supply chain.
In the coming week, ministers are anticipated to announce a fresh initial price for the upcoming subsidy bidding, which is expected to provide increased assistance for offshore wind companies.
The anticipated maximum bidding limit, to be announced on Thursday, comes after extensive discussions between the offshore wind sector and government officials regarding the increasing expenses within the industry.
Offshore wind companies are facing difficulties in progressing with new ventures, as expenses in the industry have risen by approximately 40% due to inflation within their supply networks and increased interest rates.
Worries escalated when no firms vying to construct offshore wind turbines in the UK participated in the government’s latest yearly clean energy bidding process. These companies had previously stated that the government’s maximum electricity price was too low to make their projects financially feasible.
According to a source within the industry, government officials have been actively working with the industry following the unsuccessful auction to prevent a repeat of the situation. They have been attentive and responsive to feedback and concerns.
The Labour party referred to the auction as “a catastrophe for energy security,” warning that the UK risks losing out on billions in investments and potentially facing increased energy costs if it interferes with the country’s goal to triple its offshore wind power capacity by 2030.
The government has been urged by the industry to increase the initial bidding price for the auction. This auction grants contracts to produce renewable electricity for a period of 15 years at a fixed rate determined by the lowest bid. Furthermore, there have been requests for longer contract durations in order to achieve a lower price.
The government initiated an unsuccessful bidding process with a starting price of £44 per megawatt-hour following the previous round’s record low contract prices of slightly over £37/MWh. According to a Bloomberg report, officials are getting ready to disclose a new starting price of £70 to £75/MWh to account for the industry’s increased expenses.
The numbers appear to be based on assumptions. We will not know the actions of the government until they are revealed next week, according to a second source in the industry. More information is expected to be revealed on Thursday, but with all the current uncertainty within the government, even that is not certain.
Increasing expenses have sparked worries within the international offshore wind sector. In recent weeks, Ørsted, a Danish wind corporation, has called off two significant undertakings along the New Jersey shoreline in the United States. Similarly, Vattenfall from Sweden has abandoned its proposal for an extensive offshore wind farm near Norfolk, UK due to escalating costs rendering it unprofitable.
A representative for the government declared that their clean energy bidding process has been a triumph for the UK and they are dedicated to ensuring a successful next round that includes offshore wind.