Stunning low prices for offshore wind in UK bode well for Australian plans

The UK government has secured the lowest ever prices for renewable energy in its latest renewable energy auction, locking in contracts for 11GW of capacity, with stunningly low prices for offshore wind boding well for Australia’s own plans to add this technology to its energy suite.

The successful results were achieved at the fourth renewable energy auction run by the UK government, which is hoping to drive investment in new renewables projects to cut emissions and reduce British dependence on costly fossil gas.

Through the auctions scheme, the UK government is offering project developers 15-year term contracts-for-difference that lock-in revenues for the projects and secure fixed-prices for wholesale electricity for consumers.

Offshore wind was overwhelmingly the most successful technology selected at the latest auction, with almost 7GW of new offshore capacity winning contracts.

Contracts were also awarded to an additional 900MW of onshore wind capacity, with 2.2GW of solar projects and 41MW of tidal power – split across four projects around Scotland and Wales – also making successful bids

The headline, though, was for almost 7GW of offshore wind projects that were secured at an average contract price of £37.35/MWh (or $A65/MWh).

Australia does not have any offshore wind farms, but it has a growing portfolio of more than 20GW of potential projects, encouraged by new legislation that paves the way for construction in Commonwealth waters, and a Victoria mandate for 9GW of offshore wind capacity by 2040.

See RenewEconomy’s Offshore Wind Farm Map of Australia

In other auction results, onshore wind projects secured a price of £42.47/MWh (A$75/MWh) while the 2.2GW of solar projects will be locked in at a price of £45.99/MWh (A$81/MWh).

There was also a single floating wind project, of just 32MW and priced at £87.30/MWh. Several of Australia’s proposed projects are considering the use of relatively new floating wind technology due to their proposed location in deeper waters.

The contracts-for-difference arrangements will work in a similar way to the scheme implemented by the ACT government, which have locked in wholesale electricity prices at a fixed level – meaning Canberra’s energy consumers have been protected from the recent surge in Australian wholesale electricity prices.

UK energy secretary Kwasi Kwarteng said the contracts will help shield UK energy users from potential future price spikes of gas generation, with a recent surge in gas prices contributing to the UK’s own energy crisis.

“Eye-watering gas prices are hitting consumers across Europe. The more cheap, clean power we generate within our own borders, the better protected we will be from volatile gas prices that are pushing up bills,” Kwarteng said.

“Thanks to today’s record renewable energy auction, we have secured almost 11GW of clean, home-grown electricity – which would provide as much power as around 6 gas fired power stations.”

“These energy projects already have planning permission, now they have a funding contract in place. We’re going to these projects built as soon as possible to better protect millions of British families from rising costs.”

The positive results come amongst political chaos for the UK government, with prime minister Boris Johnson announcing his intention to resign from the position after losing the confidence of a significant number of his ministers.

Melanie Onn, the deputy chief executive of RenewableUK – the industry association that represents renewable energy projects – said the strong auction results show renewables provide a path to phasing-out gas use in the UK.

“Today’s record-breaking auction results show that there is a way to replace unaffordable gas with low-cost clean power generated by a wide range of renewable technologies led by wind, both offshore and onshore,” Onn said.

“Thanks to the rapid construction times of new onshore wind and solar sites, billpayers will start to feel the benefits of today’s auction next year.”

“The auction also showed that the UK is maintaining its position as a world-leader in innovative renewable energy technologies like tidal stream and floating wind, which will both play an increasingly significant role in our transition to clean power to meet our net zero goal.”