Weekly News Review - 11th September 2023
CfD auction fails to attract any bids for offshore wind
The government’s latest Contract for Difference (CfD) auction has failed to secure any offshore wind capacity after strike prices were set too low. The auction did manage to award contracts to 1.9GW of solar and 1.5GW of onshore wind capacity as well as a small amount of remote island wind, tidal steam and geothermal. However, the lack of offshore wind is a big blow to the government’s target of reaching 50GW of offshore capacity by 2030.
It was hoped that up to 5GW of offshore wind would be awarded contracts in the auction. But the government failed to increase the strike price above £44/MWh despite numerous warnings that development costs for offshore wind had escalated over the past year. Keith Anderson, the chief executive of Scottish Power, said: “This is a multibillion-pound lost opportunity to deliver low-cost energy for consumers and a wake-up call for government.”
“We all want the same thing – to get more secure, low-cost green offshore wind built in our waters. Scottish Power is in the business of building windfarms and our track record is second to none in terms of getting projects over the line when others haven’t been able to. But the economics simply did not stand up this time around.”
The failed CfD auction is another blow to the UK offshore wind industry following the announcement in July that Vattenfall would be halting the development of the 1.4GW Norfolk Boreas windfarm due to spiralling supply chain costs and rising interest rates. The UK currently has 14GW of operational offshore wind capacity with another 11GW under construction. However, that leaves another 25GW of capacity required to meet the government’s 50GW target by 2030.
Labour’s shadow energy security and net zero secretary, Ed Miliband, said: “The Conservatives have now trashed the industry that was meant to be the crown jewels of the British energy system – blocking the cheap, clean, home-grown power we need.”
“Ministers were warned time and again that this would happen but they did not listen. They simply don’t understand how to deliver the green sprint, and Rishi Sunak’s government is too weak and divided to deliver the clean power Britain needs.”
Oil hits $90 for first time in 2023 as Saudi Arabia and Russia extend cuts
Oil prices rose above $90 a barrel on Tuesday for the first time this year after Saudi Arabia and Russia extended their voluntary production cuts. Since July Saudi Arabia has cut its production by 1 million barrels a day with Russia reducing supply by 300,000 bpd. These cuts were originally agreed until the end of September with the expectation of being extended by an additional month, however they are now in place until the end of the year.
Brent crude, the international benchmark, broke the $90 a barrel mark on Tuesday and continued to rise throughout the week. This is the highest level since November 2022 when prices rose to nearly $100 a barrel. Oil prices have been rising steadily since the OPEC+ production cuts began in July. Saudi Arabia has reduced its output from 10.5m bpd in April to 9m bpd, which is 25% lower than its maximum capacity.
Wall Street bank Goldman Sachs has warned that oil prices could rise above $100 a barrel next year if production cuts are extended. In their most recent report, analysts warned that “a bullish scenario where OPEC+ keeps the 2023 cuts fully in place through end-2024 and where Saudi Arabia only gradually raises production” could lead to Brent oil prices rising to $107 a barrel by December 2024.
The production cuts and subsequent rise in oil prices in recent months has increased concerns over winter shortages and global inflation. There is also concern over the knock-on effect on petrol prices, which have been steadily increasing over the past few weeks across the UK.
Rod Dennis, a spokesperson for the RAC motoring group, said: “Drivers had already seen a sharp increase in pump prices through the course of August as a result of the oil price rising. An even higher oil price is likely to force wholesale fuel prices up further, and – if these are sustained – that’s likely to spell further price rises on forecourts up and down the UK in the coming weeks.”
Onshore wind ban lifted as Tory MPs threaten revolt
Levelling Up Secretary Michael Gove announced on Tuesday that the government would make a series of changes to the planning system to make it easier for onshore wind farms to be built. A de-facto ban on onshore wind farms has been in place since 2015 and means an objection from just one person over an onshore wind development in England could stop it going ahead.
However, following pressure from a group of 25 Tory MPs the government has agreed to ease the ban. The group, led by former COP26 president Alok Sharma, tabled an amendment to the Energy Bill after they became frustrated with a lack of action. But Sharma agreed to drop the amendment following talks with Prime Minister Rishi Sunak.
The government has now streamlined planning rules, meaning local areas have a greater say in how onshore wind projects should be considered, which is hoped will result in electricity bill savings and increased national energy security. The measures include broadening the ways that suitable locations can be identified, including by communities, and speeding up the process of allocating sites by giving alternatives to the local plan process.
Gove said: “To increase our energy security and develop a cleaner, greener economy, we are introducing new measures to allow local communities to back onshore wind power projects. This will only apply in areas where developments have community support, but these changes will help build on Britain’s enormous success as a global leader in offshore wind, helping us on our journey to net zero.”
However, the planned changes have been criticised for being too weak to effect any real change in the onshore wind industry. Shadow energy secretary Ed Miliband has said Labour would remove all special planning requirements for onshore wind, allowing councils to treat them like any other piece of infrastructure.
Alethea Warrington, a senior campaigner at the climate charity Possible, said: “The minor changes announced today are nowhere close to enough to unblock wind. Today’s small step forward leaves new onshore wind in England still facing higher planning barriers than anything else, including new coalmines, and it will still be too difficult for communities which want wind to get it.”
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