Energy UK has warned that the forthcoming Contracts for Difference (CfD) auction will fall well short of delivering the expansion of offshore wind needed to hit the Government’s 2030 50GW target.
The CfD scheme has played a vital role in the UK’s world-leading expansion of clean energy, in particular offshore wind, driving down costs for customers while providing necessary certainty for investors in these long-term projects.
The Government has set a target for 50GW of offshore wind capacity by 2030 – at present there is around 27GW in operation or in receipt of a CfD contract. As future offshore wind developments will almost exclusively come through the scheme, that means forthcoming auctions will need to deliver another 23GW.
However, Energy UK analysis, published today, shows that, as it stands, the scheme will fall well short of achieving this. The long lead-in times for such projects means the extra capacity will need to come from the next three annual auctions, working out at a record 8GW each round. Yet the forthcoming (AR5) auction will, at best, bring forward 3.2GW of new capacity – 4.8GW short of the necessary amount and meaning the next round will have even further to catch up.
In fact, the rising costs and other challenges facing developers of clean energy projects, highlighted by Energy UK and others over recent months, means it is likely the auction will actually bring forward even less capacity than the maximum possible.
The potential shortfall of (at least) 4.8GW would be enough to power 5.5 million homes annually and could cost customers an extra £530m a year by 2030, due to the additional need for more expensive imported gas, which would also lead to an extra 6 million tonnes of carbon emissions.
Energy UK’s Deputy Director, Adam Berman, said:
“Meeting the Government’s clean energy ambitions requires a relentless focus on delivery. The introduction of annual auctions was a welcome and necessary step to accelerate the rollout of offshore wind – but that will prove futile if the auctions themselves are underpowered.
“Developers are facing challenging investment conditions, but the Government simply hasn’t gone far enough in recognising the effect of higher costs in the forthcoming round.
“The stark reality is that without rapid Government intervention, the UK is set to fall short of our clean energy targets. As the 2030 target moves further and further into the distance it will lead to increased costs and emissions, and risk the UK falling behind in an increasingly competitive international market.
“We’re calling on the Government to revisit the AR5 budget, and to take urgent action to ensure the UK continues to attract crucial international investment. We have been a leader in offshore wind, but underdelivering on the Contracts for Difference programme will jeopardize the UK’s ability to maintain and expand our position as a clean energy superpower. We can’t afford to lose out on homegrown energy projects that will bring down bills, lower emissions, and bolster our energy security.”