It has been less than a month since the new Labour Government, which is led by Prime Minister Keir Starmer, took office. On the other hand, they have already begun undertaking a number of substantial measures in order to hasten the spread of wind power both onshore and offshore. The budget for the forthcoming contract for difference auction round (AR6) was officially increased to a record-breaking amount of 1.56 billion pounds by the government only yesterday. Bottom-fixed offshore wind will be able to have access to the bulk of that, which amounts to £1.1 billion. Of course, that is not all. Additionally, the government has eliminated the de facto restriction on onshore wind in England and is working with GB Energy and The Crown Estate to promote seabed leases as part of a new cooperation.
Along with a pledge to double onshore wind capacity and quadruple offshore wind capacity by the year 2030, the new government of the United Kingdom has made a commitment to entirely decarbonize the power consumption of the United Kingdom by the year 2030. Wind energy is the cornerstone of this ambition.
This coming summer will see the sixth round of the contract for difference auction, which is scheduled to take place. In the month of September, it is anticipated that successful initiatives will be unveiled.
Large-scale commitment to bottom-fixed and floating offshore wind turbines
It was stated yesterday that the government will be increasing the funding for AR6. The entire budget was increased by £500 million, reaching a record price of £1.56 billion. Of this amount, £1.1 billion would be designated for bottom-fixed offshore wind. This is a significant step that will make it possible to enhance the amount of offshore wind deployment, and it is 38% larger than the budget of £800 million that was recommended for offshore wind by the previous government of the United Kingdom.
There has been a rise in the expenses associated with creating new offshore wind farms due to inflation and increasing input prices. That is something that the government of the United Kingdom has recognized. Increasing the total budget for AR6 is the appropriate course of action to accomplish. Together with the increased price ceiling for single bids that has already been agreed upon, which is currently set at £73 per megawatt-hour, this will result in a robust interest from the sector as well as healthy competition among project developers.
These new pricing realities were not taken into consideration by the government during the latest auction round, which took place in 2023 (AR5). Instead, the government maintained a stringent price cap of £44 per megawatt-hour. The end consequence was that not a single proposal was submitted for an offshore wind project in the previous year, which meant that the United Kingdom missed out on an entire year of offshore wind development.
This is a really encouraging advance in the situation. The decision made by the government of the United Kingdom will improve the country’s economic competitiveness and boost its energy security. According to Phil Cole, Director of Industrial Affairs at WindEurope, it will also assist in the creation of tens of thousands of new jobs in the wind energy industry and will help to reestablish the United Kingdom’s position as a worldwide leader in renewable energy.
The government has also increased the funding that is available for emerging technologies, such as floating offshore wind, by £165 million, bringing the total amount to £270 million. This is a 61% increase and is a significant indication of confidence for the floating offshore wind business in the United Kingdom.
An increase in the budget is to be welcomed; nevertheless, it will not enable investments to be made in all of the current shovel-ready projects in the United Kingdom. Setting budgets in accordance with the amount of capacity that the United Kingdom Government is able to obtain in each and every yearly auction coming ahead is the best way to ensure that it remains on track to accomplish its objectives for the year 2030.
Optimistic indications for the onshore wind
The Labour Government has already begun the process of lifting the de facto ban on onshore wind in England, which was implemented on their very first full working day in power. In the meanwhile, they have made the announcement that they would establish an onshore wind taskforce with the purpose of removing obstacles to deployment and reestablishing a significant pipeline of new onshore wind projects in England. Ed Miliband, the Secretary of State for Energy Security and Net Zero in the United Kingdom, and Matthieu Hue, the Chief Executive Officer of EDF Renewables UK, will serve as the task force’s chairpersons. Members of the taskforce will include representatives from a variety of regulatory authorities, as well as RenewableUK, the trade group for renewable energy in the United Kingdom.
Pot 1 of the forthcoming CfD auction round, which will include competition between onshore wind and solar technologies, was boosted by the government by £65 million, bringing the total amount to £185 million.
De-risking, seabed leases, and supply chain management are all areas in which GB Energy and The Crown Estate will work together.
The establishment of Great British Energy (GB Energy), a state-owned energy generating firm, is now being carried out by the government. In order to lessen the risk that private investors face and to make it easier for private investors to participate in clean power, GB Energy will make investments in early-stage renewable energy projects. Through the use of its budget of 8.3 billion pounds over a period of five years, GB Energy intends to leverage private investment of between 30 and 60 billion pounds into renewable energy projects.
The Crown Estate is a public organization that manages the portfolio of land and property interests owned by the British royal family. This portfolio includes the seabed surrounding the United Kingdom. GB Energy will develop a partnership with The Crown Estate. Through their collaborative efforts, GB Energy and The Crown Estate will reduce the amount of time required to construct new wind farms, with the ultimate objective of releasing 20-30 GW of additional offshore wind seabed leases by the year 2030.
It is now possible for the Crown Estate to borrow money by using the seabed leasing fees that it charges developers in order to successfully generate funds. Because of this, it is able to make investments in the wind energy supply chain in the United Kingdom, which will involve the construction of much-required port facilities and more manufacturing capacity.
It is imperative that GB Energy does not interfere with the billions of pounds of private investment that the United Kingdom needs. Rather than competing with current investments, it needs to complement them by concentrating on technologies that are not as well established, such as floating offshore wind. The onshore wind community energy projects will also be eligible for incentives from GB Energy.
Plans to establish a new National Wealth Fund have also been disclosed by the government of the United Kingdom. Clean energy and other infrastructure projects would be among the investments that the fund would make. Additional finance in the amount of about £7.3 billion will be made available via the United Kingdom Infrastructure Bank in order to launch projects immediately. This is done with the intention of stimulating private investment on a larger scale.
