The UK’s latest renewable energy auction has made offshore wind cheaper than new-build gas, after projects were awarded at £57.50 ($76; €63.30) per MWh.
DONG Energy’s 1.4GW Hornsea Project Two site and the 950MW Moray offshore wind farm owned by EDPR (77 percent) and ENGIE (23 percent) were awarded the record-breaking price by the UK government – a 50 percent reduction on the prices given in the previous instalment of the contract- for-difference scheme two years ago.
The two projects will need to be commissioned in 2022-23 to qualify for the 15-year strike price. The price is a reduction on new-build gas projects, projected by the UK’s Department for Business, Energy & Industrial Strategy to be £66 per MWh in 2020, and cheaper than the much-debated Hinkley Point C nuclear station, priced at £92.50 per MWh.
A third offshore wind project to benefit from the auction, the £2 billion, 860MW Triton Knoll site owned by Innogy (50 percent) and Statkraft (50 percent) will be delivered at £74.75 per MWh in 2021-22. Statkraft is expected to sell its stake ahead of the final investment decision next year.
Trade body RenewableUK’s chief executive Hugh McNeal hailed the results as “astounding”, declaring “both onshore and offshore wind are cheaper than gas and nuclear”.
“Given the UK regulatory environment and development processes, we were never going to see the zero-subsidy bids that emerged in Germany and in the Netherlands, though the strike prices are getting close and are certainly far more competitive than many anticipated,” said Robert Marsh, partner and co-chair of renewables practice at law firm Norton Rose Fulbright.
Still, “it would appear that subsidy-free offshore wind in the UK is not that far away,” noted Ashurst renewables partner Antony Skinner.
More than 85MW of biomass capacity was awarded to two projects, yielding prices of £74.75 per MWh, significantly lower than the 299MW Tees Renewable Energy Plant owned by Macquarie and PKA, which received a price of £125 per MWh in 2012.
A further 64.8MW from six energy-from-waste projects received the same backing as biomass, including a 10.2MW site owned by Legal & General Property Partners through its Industrial Fund.
WHAT ABOUT TIDAL?
Despite the auction being open to the less-established technologies, there was no support for any tidal or wave projects. Tidal power developer Atlantis Resources, which last year sealed a £500 million deal with Equitix to advance its Scottish portfolio, was one bidder for support, but chief executive Tim Cornelius acknowledged the difficulties in competing with offshore wind.
“It would be a travesty if the UK were to lose out on another emerging industry where it has established a first-mover advantage and where the cost of energy is on a steep downward trajectory,” he added.
Still, others are hopeful the auction results will prompt the government to look sideways.
“These CfD results show how renewables can adapt when supported, and are a clear indication to government that they should reconsider supporting other renewable technologies,” argued Charles Hardcastle, head of energy at consultancy Carter Jonas.