U.K. government plans to install 50 GW of offshore wind energy capacity by 2030 suffered a setback when the auction for supply price contracts failed to attract any bids. Six developers signed lease agreements in January for around 8 GW at six sites, but they declined to bid for contracts-for-difference (CfD) at government prices.
Announcing the failed auction on Sept. 8, Graham Stuart, the government's energy and climate change minister, blamed "the global rise in inflation and the impact on supply chains which presented challenges for projects participating in this round."
But Ed Miliband, energy spokesman for the opposition Labour party, criticized the government for not reflecting inflation in its auction pricing. He contrasted the U.K. experience with this May's successful auction covering 3 GW of offshore wind capacity in the Irish Republic. That secured an average CfD strike price of around $93 per MWh. The U.K. government capped its strike price at $55 for fixed base installations and $145 for floating platforms.
“It’s clear that this year’s auction represents a missed opportunity to strengthen Britain’s energy security and provide low-cost power for consumers," said Richard Sandford, co-chair of the government/industry Offshore Wind Industry Council. "Lessons must be learned to ensure that the parameters of the auction are set correctly in the future."
The poor U.K. response came as no surprise to industry watchers. CfD prices "were just set too low ... It's time for a reset," said Alistair Phillips-Davies, CEO of developer SSE plc., which declined to bid for the recent CfDs.
Mads Nipper, CEO of Denmark-based Ørsted A/S, recently told the Financial Times that the government would struggle to get bids at current prices.
Conditions were so dire that Sweden’s state-controlled offshore wind developer Vattenfall AB in July shelved its 1.8-GW Norfolk Boreas project. “We have seen cost increases in the supply of offshore wind of up to 40% ... for the entire market,” said firm CEO Anna Borg.
The quasi-state Crown Estate company, which manages the U.K. seabed, is now working on the next auction for wind project leases. The government hopes to invite CfD bids for these new developments in 2024.
In the U.S., the first auction for federal offshore wind energy projects sites in the Gulf of Mexico Aug. 29 drew just one bidder.