UK warned net zero target slipping away after ‘disastrous’ green power auction

The renewables industry warned that the UK’s goal of decarbonising its grid by 2035 and hitting 50GW of offshore wind by this decade's end may now be out of reach without “urgent action” to fix its process for securing green energy investment, after its latest auction flopped.

The government’s energy and climate change minister Graham Stuart stressed that a “record number” of renewables projects were awarded, including 1.9GW of solar and about 1.5GW of onshore wind from 95 projects in total.

This was no surprise given the absence of offshore developers, which typically dominate the auction.

Up to 5GW of offshore wind was eligible to compete, which could have powered nearly eight million homes a year. Instead, this was the first time since the UK’s immensely successful CfD auctions began that no offshore wind was awarded.

Tom Glover, country chair for the UK at German renewables producer RWE, said the UK’s ambitions for a five-fold offshore wind growth by 2030 and a net zero power system by 2035 are now “unlikely to be met without decisive government action.”

“Our industry needs the certainty of stable, future CfD auction rounds based on sustainable pricing, separate pots for offshore wind, and realistic assumptions.”

He continued that it was “very disappointing that, despite clear warnings from the industry, the government took no action to address the rising costs for all renewable technologies and the supply chain challenges they face.”

'Economics simply did not stand up'

“This is a multi-billion pound lost opportunity to deliver low-cost energy for consumers and a wake-up call for government, said ScottishPower CEO Keith Anderson. The UK unit of global green giant Iberdrola could have come to the process with projects from its huge East Anglia offshore wind zone.

“The CfD process is recognised globally as a lynchpin of the UK’s offshore success, but it also needs to flex to keep pace with the world around it,” he said.

“ScottishPower 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.”

Richard Sandford, co-chair of the UK’s Offshore Wind Industry Council, said that 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.”

'Urgent action' needed to draw back investors

RenewableUK CEO Dan McGrail said that the industry had “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,” he said. “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,” he said.

“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,” he added. “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.”

RenewableUK said that the government must “fix the investment framework” through increased support for supply chains and “fiscal measures to attract clean energy investment into the UK in the face of global competition.”

'Moment of reckoning'

“It will surprise few in the industry however, which has been warning about profitability challenges resulting from inflation and spiralling project costs for years. So far, these warnings seem to have fallen on deaf ears, with government continuing to ratchet administrative strike prices downwards in the expectation of business as usual.”

“With the failure of offshore wind” in this auction, he said it seems that a “moment of reckoning has arrived. Its time for industry and government to come around the table to find the right evolution of the CfD mechanism to drive the investment we urgently need.”

Jess Ralston, Energy Analyst at the Energy and Climate Intelligence Unit said: “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 £1bn from no offshore wind bids, which again would be far cheaper than the alternative gas.”

Will Sheard, director of analysis and due diligence at renewables consultant K2 Management, said: "Although the government did promise to incorporate more non-financial considerations into the auction process, this alone won’t address the core issue of strike prices being insufficient to cover projects in the short term.”

A “modest rise” in the assumed cost of offshore wind would still make it a “very attractive proposition” and significantly ease current challenges, he added.

'Biggest disaster for clean energy in almost a decade'

Ed Miliband, Shadow Secretary of State of Climate Change and Net Zero, said on X, formerly Twitter, that this is an “energy security disaster for our country.”

He said that the Conservative government led by Prime Minister Rishi Sunak has trashed the crown jewels of the British energy system.”

“Ministers were warned time and time again that this would happen, but they did not listen,” he said. “The Conservatives simply don’t understand how to deliver the green sprint,” adding that the government is “too weak to deliver the clean power Britain needs.”

Greenpeace UK’s policy director, Doug Parr, said: “This monumental failure is the biggest disaster for clean energy in almost a decade.”

“Offshore wind is one of the cheapest and cleanest forms of power there is, but in an effort to save consumers pennies on their energy bills, the government is costing them pounds.”