Weekly News Review - 14th August 2023

UK offshore wind industry hit by rising costs

Industry experts have warned ministers that the UK risks falling behind as a world leader in offshore wind energy due to the rising costs of development. Without urgent government support there is a real risk that the UK will not be able to expand offshore wind capacity fast enough to meet legally binding climate targets.

The government has set a target to increase offshore wind capacity from 14GW to 50GW by 2030. It is seen as a key milestone to achieving the goal of decarbonising the electricity system by 2035. However, last month Vattenfall decided to stop work on the 1.4GW Norfolk Boreas windfarm. Since the project was awarded a Contract for Difference (CfD) last year at a record low strike price of £37.35/MWh supply costs have increased by 40%.

Jan Matthiesen, head of offshore wind at the Carbon Trust think-tank, said: “The UK offshore wind industry is at a tipping point. The maximum prices set are now too low. Last month, we saw Vattenfall withdraw from the Norfolk Boreas windfarm. This may be the first of many if bold and swift action is not taken.”

Adam Berman, a deputy director of Energy UK, said: “To put it simply, if we have any hope of reaching the ambitious targets that the government has set, we cannot afford more major projects to delay or to stop altogether. If we fail to put in place a financially sustainable regime, we do run the risk of under delivering. We are running the risk of the first CfD round that might actually not procure a major offshore wind project.”

Last week, energy secretary Grant Shapps increased the subsidy pot for the upcoming CfD round by £22m in an attempt to tackle concerns. A Department for Energy Security and Net Zero spokesperson said: “The contracts for difference scheme, which has helped secure this huge progress in offshore wind, is designed to protect generators against price fluctuations, and compares favourably to other international schemes.”

They added: “The move to annual auctions was introduced in response to calls from industry and is set to bolster further investment and increase developer confidence in the sector every year. However, we understand there are supply chain pressures for the sector globally, not just in the UK, and we are listening to the sector’s concerns.”

UK renewable energy investment lagging behind rest of world

UK investment in renewable energy has dropped far behind the rest of world in recent years leading to criticism from environmental groups. Analysis of global data shows that renewable capacity in the rest of the world increased by an average of 9.67% over the past three years. However, UK capacity only increased by 1.96% in 2020, 3.65% in 2021 and 7.74% in 2022 giving an average increase of 4.45%, which was less than half the global average.

RenewableUK director of policy, Ana Musat, said: “The government urgently needs to develop a comprehensive strategy for making the UK renewables sector the most attractive to global investors, so that we can continue to build new clean energy projects at scale and attract supply chain investment in key areas such as blades, cables and floating offshore wind.”

Roger Fouquet, a senior research fellow at the Energy Studies Institute in the National University of Singapore, said: “The UK’s current renewable electricity capacity is below 50%, and has a great deal of further investment to undertake to claim to be a leader in low-carbon energy systems. In fact, 45% of European economies have a higher share of renewable electricity capacity.”

The Department for Energy Security and Net Zero said: “We won’t apologise for moving faster and earlier on renewable energy than many other countries, and we are glad to see that nations across Europe and the rest of the world are starting to catch up.”

“We have already attracted around £120bn investment in renewables since 2010, and are expected to attract a further £100bn in net zero by 2030 – powering up Britain and supporting up to 480,000 jobs. This has meant we have increased the amount of energy coming from renewables from 6.7% in 2010 to 41.5% in 2022.”

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