The price of offshore wind power in the UK has fallen to a record low, which could ease the pressure on future household energy bills.
After the UK’s biggest-ever renewable energy auction, the government said on Thursday that the price of a wind farm contract was nearly 6% lower than the previous auction, despite rising costs of materials to build wind farms.
A series of new contracts is set to add around 7 gigawatts of clean energy capacity to Britain’s turbine fleet by 2026. The government hopes to have 50 GW by 2030 and has launched a push to expand Britain’s renewables industry in the face of a rapid rising fossil fuel prices.
Russia’s incursion into Ukraine has worsened an already volatile oil and gas market and left countries scrambling to shore up energy supplies.
UK ministers have been forced to ask coal-fired power stations to continue operating through the winter due to fears of power cuts caused by energy shortages.
However, renewable energy, including wind power, is seen as central to Britain’s goal of achieving zero carbon emissions by 2050.
Offshore wind farm operators will sell power for just £37.35 per megawatt hour, 5.8% below the lowest bid in the last auction in 2019.
“Contracts for difference” guarantee wind companies fixed prices for selling electricity for the next 15 years. If the market price falls below the contract price, the government subsidizes the difference. If the market is higher, the companies return the money to the government.
Since wholesale energy prices started to rise last year, wind farms have started paying back money to the government.
The easing of the effective moratorium on new onshore wind farms – which was imposed in 2015 – means that onshore wind and solar have been auctioned for the first time in seven years. Onshore wind is now around 45% of the price secured in the 2015 auction.
Among the winners of the auction were the Danish energy company Ørsted, Scottish Power and Sweden’s Vattenfall.
Ørsted has secured the contract for the world’s largest offshore wind project, at Hornsea Three, 100 miles (160 km) off the east coast of Yorkshire. It is hoped that the project will produce enough renewable electricity to power 3.2 million homes in the UK.
Scottish Power has secured the contract for the East Anglia Three offshore wind project, five onshore wind projects and 10 solar farms. Vattenfall has agreed terms for the Norfolk Boreas offshore wind farm, which it says will meet the needs of around 1.5 million homes.
It is hoped that the projects will ultimately help reduce consumer bills, which are expected to reach £2,800 from October.
Business Secretary Kwasi Kwarteng said: “The apparent gas price hikes are hitting consumers across Europe. The more cheap, clean energy we generate within our own borders, the better protected we will be from volatile gas prices that drive up bills.”
Separately on Thursday, National Grid set out the biggest investment plan in the UK electricity network since the 1960s. In the £54 billion upgrade, grid connections for offshore wind farms will be coordinated for the first time.
National Grid’s electricity division has proposed 15 connection points to bring 18 offshore wind farms onshore. Most offshore wind projects have their own connection to the grid. National Grid hopes to cut costs and reduce disruption to coastal residents by reducing the number of cables and poles needed.
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Scottish Power chief executive Keith Anderson has called on the government to speed up the task of approving renewable energy projects and connecting them to the grid. “There is huge public support for the goal of reaching net zero. It needs speed. The planning system itself is fine, but it’s about a faster process,” he said.
Gareth Miller, chief executive of consultancy Cornwall Insight, said: “With consumer bills rising to unprecedented levels, these results show the value that renewables can play in reducing the cost of generating electricity, de-cluttering electricity from gas prices and all in an environment where currently high gas prices set the price of electricity in the market.
This week, the manager of the Queen’s estate, the Crown Estate, identified five areas off the coast of Cornwall and Pembrokeshire that could host floating wind farms.
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