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40GW wind target positive step but £50bn of investment and annual CfD auctions needed

Image: Getty.

Image: Getty.

If the UK is to meet its new offshore wind target of 40GW by 2030, further funding and more frequency Contract for Difference (CfD) auctions will be needed.

Speaking to Current±, Aurora Energy Research project leader Weijie Mak explained that the company’s analysis suggested that £50 billion work of expenditure over the next ten years would be needed to reach the target. This figure is far higher than the £160 million pledged by the prime minister Boris Johnson in his speech at the Conservative Party conference yesterday, when he announced that the offshore wind generation target would increase by 10GW.

“It's definitely not far enough,” said Mak. “I think it’s the right step, but there's probably quite a bit more money that would be required to get us to the 40GW that Boris Johnson has pledged.”

The money pledged will help develop the supply chain, supporting the expansion of manufacturing – with an inbuilt target of 60% of offshore wind farm content coming from the UK – in particular in ports in Teesside and Humber in Northern England, Scotland and Wales. But subsidy schemes like the CfD auctions will be essential for driving forwards the construction of the offshore wind farms fast enough to meet the new target.

This is something identified by Johnson, noting that the government will set a target to double the capacity of renewable energy in the next CfD auction, which is expected to open in late 2021. This will provide enough “clean, low cost energy to power up to 10 million homes” a government release noted.

Mak suggested that CfD auctions will need to be held every year if they are to truly commit to reaching 40GW by 2030. But, he notes that Johnson’s announcement will help to provide the industry with confidence going forwards.

“They will probably have to start announcing more auctions or increasing auction capacity that they are procuring for that real commitment to be seen by the general public and developers.”

CfD auctions in the UK have already helped the sector grow to 10GW at the moment, with prices falling dramatically.

In the third CfD auction round in September 2019, offshore wind projects cleared at just £39.65/MWh, representative of a ~30% reduction in the two years since the second round delivered offshore wind projects at strike prices of £57.70/MWh.

Such progress has allowed the country’s renewable energy sector to grow dramatically, allowing 2020 to be a record breaking period for the sector.

“The offshore wind sector is a major British success story, providing cheap, green electricity while supporting thousands of good-quality jobs,” said energy secretary Alok Sharma.

“Powering every home in the country through offshore wind is hugely ambitious, but it’s exactly this kind of ambition which will mean we can build back greener and reach net zero emissions by 2050.”

But, while further ambition was broadly welcomed by the industry following Johnson’s announcement, caution was voiced about the ability of the grid to manage such amounts of intermittent generation.

This was echoed by Mak, who stated “a lot more has to be done in terms of grid stability”. The need for grid balancing services has been particularly thrown into light in recent months, as renewables surged while demand remained low due to the COVID-19 lockdown, giving a glimpse of the grid of the future.

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