Energy security: Offshore wind capacity expected to increase through “record” auction budget | Business News

This year’s budget to support the next wave of renewable energy schemes has been raised to a “record” £1.5 billion, the government has announced, following a failed funding process in 2023.

Energy Secretary Ed Miliband said the additional £500 million for the imminent renewable energy auction represented a commitment to the Labor Party’s aim to provide clean, cheap, low-carbon electricity to families and businesses in the wake of the energy-driven crisis. . cost of living crisis.

The consequences of the Russian invasion of Ukraine has seen wholesale gas and electricity costs rise to unprecedented levels, with the latest government opting to fill some of the resulting gap in supply through new oil and gas extraction licenses.

Last year’s renewable energy auction process, an annual event in which energy companies compete for so-called contracts for difference (CfD), failed to attract a single proposal for new offshore wind energy.

Energy developers stated that this was because the government of the time did not take into account the huge cost increases they were facing since the increase in wholesale prices.

The Conservatives increased the budget for the September auction to £1 billion as a result of the criticism, but the new government signaled that an even bigger commitment was needed to get new green energy generation up and running again.

The so-called “budget” under the CfD regime guarantees future prices to both producers and consumers, so that neither ends up paying large additional bills in the event of a major price shock.

When global electricity prices rise above the fixed price a generator can charge, the money is returned to consumers through their bill.

When wholesale electricity prices are lower than the agreed price, the Treasury pays the difference to the generator.

The new budget projections include £1.1 billion for offshore wind.

The sum represents a £300 million increase over the amount planned by the Conservatives.

The balance is made up of £185m for established technologies such as onshore wind and solar, and £270m for emerging renewables such as floating offshore wind and tidal power.

The Energy and Climate Intelligence Unit estimated that the auction would likely secure enough offshore wind power to save £30-£40 a year on each household’s energy bill in the event of a future gas crisis.

But experts also warned that it was difficult to know how much additional capacity would be created by the conclusion of the auction process.

The announcement is based on Labour’s lifting of the de facto ban on onshore wind farms in England.

The government has also launched public green energy company Great British Energy which, in partnership with the Crown Estate, aims to deliver a boost in new offshore wind capacity off the UK coast.

Miliband said: “Last year’s round of auctions was a catastrophe, with zero offshore wind guaranteed and delaying our shift from expensive fossil fuels to energy independence.

“Instead, we are supporting the building of industry in Britain, with this year’s auction fetching the biggest budget yet.

“This will restore the UK as a global leader in green technologies and provide the infrastructure needed to increase our energy independence, protect taxpayers and become a clean energy superpower.”

The announcements were widely welcomed by climate advocates and the industry.

Emma Pinchbeck, chief executive of industry body Energy UK, said of the auction budget: “The sooner we can get new wind and solar projects up and running, the sooner we can increase our energy independence with clean local energy that reduces our dependence on gas expensive foreign exchange and helps protect us from a repeat of the price shocks that have hit customers hard in recent years.

“Offshore wind energy is key to achieving the government’s 2030 target and we know that the vast majority of this capacity must be delivered through this round of auctions and next year.

“This 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 energy last year, so we’ve already seen what can be achieved – not just through generating our own clean energy, but also how these projects can bring investment, growth and high-quality energy jobs to all parts of the country, boosting local economies and supply chains,” she concluded.