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New Energy World™ embraces the whole energy industry as it connects and converges to address the decarbonisation challenge. It covers progress being made across the industry, from the dynamics under way to reduce emissions in oil and gas, through improvements to the efficiency of energy conversion and use, to cutting-edge initiatives in renewable and low-carbon technologies.
Can the UK learn from Europe on funding offshore wind?
1/11/2023
8 min read
Feature
The latest funding round for UK offshore wind farms yielded no bids from developers, yet the method had previously been an enormous success, both in getting wind farms built and keeping down costs to energy consumers. Time to learn from some European countries, writes Nick Cottam.
When it comes to offshore wind developments, the UK can justifiably claim to be a world leader. The same goes for the UK’s introduction of the Contract for Difference (CfD) agreements to support these projects. In helping to make some of the largest renewable energy projects financially viable over an agreed period, CfD has indeed made a difference.
A hiccup of late in this two-pronged success story, has been the latest (fifth) UK CfD auction, when 5 GW of new offshore wind capacity was up for grabs. Unlike its highly contested predecessors, this particular auction didn’t attract a single offshore wind project bid, although it did award support for 3.7 GW of other technologies, including 1.7 GW of onshore wind. Offshore wind very much emerged as the poor relation.
The reason was simple: the CfD strike price was deemed too low in the face of rising development costs. Did this mean that the UK’s pioneering version of CfD would have to go back to the drawing board? Maybe. ‘The price was not pushed up from last year despite a number of drivers pushing up the return required to meet development costs, including capital and increased operational costs,’ says Lee Drummee of the energy market research company Cornwall Insight.