The latest auction of Contracts for Difference (CfD), a scheme which aims to support the mechanism of developing low-carbon electricity generation, failed to attract bidders for new offshore wind projects, due to the prices set for electricity generated from those projects being set too low to make these projects viable. However, some deals were agreed for onshore wind, solar, geothermal and tidal electricity production projects.
The aim of CfD is to guarantee the price per megawatt hour, and if electricity prices are above the price set, the companies pay the excess back to energy suppliers, which should help to reduce the bills. If prices fall below the guaranteed price, the energy suppliers as well as customers, pay the company the difference.
In March 2023, the government pledged to develop 50GW of offshore wind electricity production by 2030, up from 14GW achieved today, with a major focus on offshore wind, which currently the UK is leading, second only to China. However, with the companies failing to bid on the new developments, this target may be harder to reach.
Last year's CfD auction delivered 11GW of renewable electricity projects, whilst this year only 3.7GW was secured through the scheme.
The minister for Energy and Climate Change, Graham Stuart said: "Offshore wind is central to our ambitions to decarbonise our electricity supply and our ambition to build 50GW of offshore wind capacity by 2030, including 5GW of floating wind, remains firm.
"The UK installed 300 new turbines last year and we will work with industry to make sure we retain our global leadership in this vital technology."
The energy firms blame the soaring costs of building and maintaining the wind farms that resulted in a lack of bids in the scheme, where the price floor set by the government for a megawatt hour is £44, which fails to take into account the rising costs.
The chief executive of Scottish Power, Keith Anderson, said that the poor outcome of the auction was a "multi-billion pound lost opportunity to deliver low-cost energy for consumers and a wake-up call for government", but added that "the economics simply did not stand up this time around".
The shadow energy security and net-zero secretary, Ed Milliband, said that the poor outcome of the auction was an "absolute disaster for Britain", but should have been avoidable, and criticised the government that the industry representatives said that "unless they adjusted the auction price this would happen".
