UK boosts auction budget, edging offshore wind capacity closer towards 2030 target

At £1.5Bn (US$1.9Bn), including £1.1Bn for offshore wind, the new budget is approximately 50% higher than the budget set by the outgoing Conservative administration, a budget that was criticised for being too low for enough offshore wind capacity to be contracted to keep the UK on track to meet 2030 deployment targets. Industry associations had been calling for a budget increase that was bigger still. Many said the budget needed to double. 

Increasing the budget will mean that the government can contract for much more offshore wind capacity than would have been possible had the budget been maintained at the level set by the former Conservative government, but not as much as some in industry had sought. It also moves the UK closer to its target for a net-zero grid by 2030. 

In 2019, the UK Conservative government set a target for 50 GW of offshore wind by 2030, including up to 5 GW of floating offshore wind. The new Labour government has signalled a desire to increase this to 55 GW, plus 5 GW of floating wind, but there is a large gap in delivering that by the end of the decade, hence the need for a higher budget for AR6.

As highlighted recently by OWJ, the UK has 14.7 GW of installed offshore wind capacity, with another 13.3 GW in construction or committed through secured government support. This leaves a large capacity shortfall of more than 20 GW that needs to be delivered by 2030 to meet targets. The pipeline of potential projects is more than sufficient to meet the target, but rapid progress is needed to move potential sites into active project deployment.

As energy think tank Ember and others have highlighted, sufficient capacity to meet 2030 targets cannot be awarded and constructed without a big boost to the budget for AR6, and AR7, which will take place in 2025.

To meet the capacity shortfall, around 10 GW of offshore wind would need to be commissioned from each of the 2024 and 2025 CfD auctions, but only half this total, around 3-5 GW, was projected to be supported through the AR6 auction.

Energy Secretary Ed Miliband said, “Last year’s auction round was a catastrophe, with zero offshore wind secured, delaying our move away from expensive fossil fuels to energy independence. Now, we are backing industry to build in Britain, with this year’s auction getting its biggest budget yet. This will restore the UK as a global leader for green technologies and deliver the infrastructure we need to boost our energy independence, protect billpayers, and become a clean energy superpower.

“Overall, the funding uplift represents more than a 50% increase on the budget previously set in March, driving clean energy investment in the UK, supporting high-quality jobs in industrial heartlands and coastal communities, while protecting household bills from volatile fossil fuel prices.”

Responding to the new budget, ScottishPower chief executive Keith Anderson said, “The auction needed a reset after last year and we welcome the increased budget, which is an important investment signal to the industry to make Britain a clean energy superpower, secure more low-cost offshore wind and spur economic growth. This will unlock billions in private investment, support thousands of jobs, strengthen our energy security and produce the green and affordable power needed for decades to come.”

RenewableUK chief executive Dan McGrail said, "It’s great to see government choosing to unlock more investment in renewable energy projects by increasing the budget for the next CfD auction. New wind and solar farms will improve our energy security, drive economic growth, support thousands of new green jobs and ensure we continue to create a lowest-cost electricity system for billpayers.

"This builds on a series of positive announcements from government which are increasing investor confidence in the UK, including ending the ban on onshore wind in England and approving new large-scale solar farms.

"This auction will not unlock investment in all shovel-ready projects, so the government will need to ensure the next auction rounds focus on project delivery, to ensure we achieve the Prime Minister’s clean power mission and increase the confidence of investors in the UK’s supply chain."

Energy UK chief executive Emma Pinchbeck said, “It is a real boost for our clean energy ambitions that the upcoming auction round will now be able to deliver more renewable power. The sooner we can get new wind and solar projects up and running, the sooner we can boost our energy independence with clean, homegrown power that reduces our reliance on expensive foreign gas and helps protect us from a repeat of the price shocks that have hit customers hard in recent years.

“Offshore wind is critical to hitting the government’s 2030 target and we know that the vast majority of this capacity must be delivered through this auction round and next year’s. That remains a huge challenge but this is certainly a big step in the right direction and another welcome demonstration of the government’s ambitions.

“As the latest figures show, renewables supplied almost half of the UK’s power last year so we’ve already seen what can be achieved – not just through generating our own clean energy but also how such projects can bring investment, growth and high-quality jobs to all parts of the country, boosting local economies and supply chains.”