Trade association Energy UK has said that the upcoming Contracts for Difference (CfD) auction will fall short of delivering the required expansion of offshore wind to hit the government’s 2030 target.
The UK Government has a pre-established offshore wind generation target of 50GW by 2030 and it is recognised as one of the vital cogs required to decarbonise the power grid by 2035. But for this, greater incentives and speed are required to scale the offshore wind industry.
The CfD scheme, which has so often been praised for supporting renewable generation projects and driving down costs for consumers, already has around 27GW of offshore wind capacity in operation or in receipt of a CfD contract.
Energy UK predicts that future offshore wind developments will almost exclusively come via the CfD scheme and because of this, the forthcoming auctions will need to deliver another 23GW – something Energy UK is sceptical of achieving.
The upcoming fifth allocation round has already been met with criticism from the industry. RenewableUK said that it was “sending the wrong investment signals” to renewable energy investors.
Similar concerns were raised by Cornwall Insight, which stated that the rising cost of capital threatens to derail the expansion of renewable energy projects such as onshore wind and solar PV.
Energy UK has now added further fuel to the fire indicating that the scheme will “fall well short of achieving the 50GW by 2030 target.”
Via analysis conducted by the trade association, the long lead-in times for such projects means the extra capacity will need to come from the next three annual auctions, working out at a record 8GW each round.
However, the forthcoming (AR5) auction will, at best, bring forward 3.2GW of new capacity – 4.8GW short of the necessary amount meaning the next round will have even further to catch up, Energy UK said.
This shortfall could have a drastic effect on the UK’s decarbonisation prospects and lead to an additional cost to customers of around £530 million a year by 2030.
Energy UK’s deputy director, Adam Berman, said: “Meeting the government’s clean energy ambitions requires a relentless focus on delivery. The introduction of annual auctions was a welcome and necessary step to accelerate the rollout of offshore wind – but that will prove futile if the auctions themselves are underpowered.
“Developers are facing challenging investment conditions, but the government simply hasn’t gone far enough in recognising the effect of higher costs in the forthcoming round.
“The stark reality is that without rapid government intervention, the UK is set to fall short of our clean energy targets. As the 2030 target moves further and further into the distance it will lead to increased costs and emissions, and risk the UK falling behind in an increasingly competitive international market.”
To help solve the issue Energy UK has called on the UK Government to revisit its AR5 budget to ensure the UK maintains its “world-leading” position in offshore wind.
“We’re calling on the government to revisit the AR5 budget, and to take urgent action to ensure the UK continues to attract crucial international investment,” added Berman.
“We have been a leader in offshore wind, but underdelivering on the CfD programme will jeopardise the UK’s ability to maintain and expand our position as a clean energy superpower. We can’t afford to lose out on homegrown energy projects that will bring down bills, lower emissions, and bolster our energy security.”