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UK offshore wind ‘back in business’ as auction adds to funded pipeline
The government in the UK has awarded contracts for difference (CfDs) to projects that will provide around 3 GW of new offshore wind capacity and 1578.51 MW of ’permitted reduction’ capacity
The Department for Energy Security and Net Zero (DESNZ) said UK offshore wind has been “revitalised” by the latest auction, “righting the wrongs of the previous auction round.”
The energy department said, “Offshore wind is back for business in UK waters – the backbone of the clean energy mission – with contracts awarded for what will be Europe’s largest and second-largest windfarm projects.”
The Allocation Round 6 (AR6) auction delivered a total of 131 new green infrastructure projects, making it the largest round ever. The results were a marked improvement on the previous auction round in 2023, which saw no offshore wind projects agreed.
The results include circa 5 GW of offshore wind capacity of which around 1.5 GW is accounted for by the new category of ‘permitted reduction.’ Permitted reduction projects are those which were awarded funding in an earlier CfD allocation round, which have withdrawn up to 25% of their project capacity to bid for AR6 funding as an independent project. Doing so gives developers the financial security to take final investment decisions and improves project viability.
Among the big winners in Pot 3 for offshore windfarms were Ørsted’s Hornsea 4 project and the 963-MW East Anglia 2 project from ScottishPower Renewables.
Inch Cape Offshore Ltd, developer of the 1.08-GW Inch Cape offshore windfarm was also awarded a CfD in AR6. The award of 266 MW will ‘top-up’ the project’s previous CfD award from Allocation Round 4.
The 400-MW Greenvolt floating offshore wind project that is being developed by Flotation Energy and Vårgrønn was also awarded a CFD.
DESNZ awarded Ørsted CfDs for a 1.08 MW share of the Hornsea 3 windfarm, as well as a 2.4-GW CfD for Hornsea 4. The CfDs were awarded at inflation-indexed strike prices of £54.23 (US$71.13) per MWh for the share of Hornsea 3 and £58.87 per MWh for Hornsea 4.
Ørsted senior vice president and head of UK and Ireland Duncan Clark said, “The important takeaway from this allocation round is that progress is being made. It is crucial this momentum continues to grow. The government has shown it takes renewable energy seriously, and we’re confident it will continue working with the sector to increase the volume of projects deployed in the UK.”
Hornsea 3 will be the world’s single-largest offshore windfarm with a capacity of 2.96 GW. Ørsted expects to take FID on Hornsea 4 within the next 18 months and is currently targeting commissioning of the project before the end of 2030.
ScottishPower chief executive Keith Anderson said, “Offshore wind is back on track after last year’s misstep which is great news for consumers. The only solution to weaning the UK off volatile fossil fuels which are the root cause of increasing bills is more clean, green energy.
“This auction’s success shows this tried and tested investment mechanism, replicated globally, delivers exactly the scale of action needed, with billions of pounds to be pumped into the British economy replacing ageing, polluting infrastructure.
“Now the government and GB Energy should focus efforts on supporting new green technologies to unleash their potential, replicate offshore wind’s success and deliver on their ambition of making Britain a clean energy global superpower.”
Inch Cape project director John Hill said, “The award of the CfD is an important milestone for the project as we continue to work closely with our key suppliers and stakeholders towards achieving financial close later this year.”
RenewableUK said the announcement shows investor confidence in the UK market is returning after the failure of last year’s auction. It noted, in total, nine offshore wind projects secured contracts at a cost of £54-59 MWh, a price in line with other recent auctions globally that reflects the dual impacts of inflation and financing costs due to high interest rates.
Riviera’s Offshore Wind Webinar Week will be held 10 September 2024. Click here to register for this free-to-attend event.
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