Contracts for Difference AR5: the industry responds

Ben Backwell, chief executive, Global Wind Energy Council:
“The UK government didn’t listen to repeated industry warnings about inflationary pressures and increased capital costs so it is no surprise that the auction has been a failure.
“This is a huge missed opportunity, particularly as offshore wind remains much cheaper than gas. The UK is competing with other markets around the world for clean energy investment – just look at how many other countries around the world are building their offshore wind sectors. The UK needs policies which will attract investment and jobs, not race to bottom pricing that makes investment impossible.
“We hope the UK government learns a lesson from this: wind energy is cheap, but it’s not free, and investors can’t be taken for granted. We are seeing these challenges around the world and governments will be watching today’s news closely. Offshore wind is set to play a huge role in the energy transition, but it’s vitally important that governments work with industry and investors to get the conditions right.”

Mark Sommerfeld, deputy director of policy, Association for Renewable Energy and Clean Technology:
“The lack of offshore wind projects is a notable setback. It calls into question whether the government target of 50GW of offshore wind by 2030 is achievable and is a stark reminder that the government must address the diminishing levels of UK investor confidence resulting from the nature of today’s real world investment conditions.
“There was also good news. The first three geothermal projects clearing the auction is an important milestone for a technology that has long had significant potential in the UK. Despite numerous shovel-ready power and heat projects, able to contribute to the UK’s energy transition, it has lacked a suitable route to market. Today’s success must be capitalised on with further funding ringfenced in future CfD allocation rounds.
“Record numbers of tidal projects and large amounts of solar and onshore wind are also good news and a reminder that we require a wide variety of technologies to get to net zero. It is essential that this new committed generation can now be built out without having to face any further administrative issues such as planning or grid capacity constraint delays.”

Richard Sandford, Co-Chair, Offshore Wind Industry Council:
“Although today’s auction results are disappointing, the offshore wind industry’s continued focus is working closely with the government to reform the auction process so that we can secure far more capacity next year and beyond. The UK has the second largest offshore wind pipeline in the world, with more than a hundred projects at all stages of development.
“It’s clear that this year’s auction represents a missed opportunity to strengthen Britain’s energy security and provide low-cost power for consumers. If all the offshore wind projects eligible to bid into this auction had done so, we could have powered the equivalent of more than five million British homes a year. So, lessons must be learned to ensure that the parameters of the auction are set correctly in the future.”

Mike Tholen, sustainability and policy director, OEUK:
“The poor uptake of the AR5 wind auction is a matter of great concern given that offshore wind will be imperative to decarbonise our economy. It is a clear indicator that the system is in urgent need of attention. Our latest Economic Report figures show £80 billion could be spent on offshore wind investments by 2030, but around half of this is waiting on Final Investment Decisions from businesses that need to be presented with a commercially attractive offering.
“A successful auction programme will support the growth of the UK’s offshore supply chain into wind as we move into deeper and more distant waters, creating fresh jobs that build on our North Sea heritage.
“To deliver the UK’s ambitious wind targets, a policy reform must take place, and we will seek to work with government to revise the investment mechanism, implement proper pricing for generators and reduce the costs of doing business in the North Sea.”

Jess Ralston, energy analyst, Energy and Climate Intelligence Unit:
“The renewables that were secured at this auction are still lots cheaper – a third for some technologies – than wholesale power prices which are set by gas.
“But the elephant in the room is the renewables that weren’t secured. We’ve potentially missed out on bill savings worth over £1 billion from no offshore wind bids, which again would be far cheaper than the alternative gas. That’s bad news for households, the industry and the government – not a good look for outdated Treasury rules to be blocking cheaper bills ahead of the next election.
“The industry says our offshore wind market, the second largest in the world, is ready to deliver. Will the government rerun this auction with sensible strike prices?”

Dan McGrail, chief executive, RenewableUK:
“Industry has warned that rising costs should have been properly priced into this auction. If the UK isn’t offering prices that allow investors to make a return, they will simply invest elsewhere. These results should set alarm bells ringing in government, as the UK’s energy security and net zero goals can only be met if we have offshore wind as the backbone of our future energy system. We need the government to show that the UK is open for business.
“The failure to secure any new offshore wind is a major blow for consumers that could, and should, have been averted. Building wind farms means we stabilise the cost of energy for the long-term and reduce our dependency on fossil fuels, prices of which can be manipulated by dictators and despots. It’s not too late to get back on track, but without urgent changes, we risk pricing ourselves out of the global race for clean energy investment.”