The government has announced a record-breaking budget of £1.5bn to support the next wave of renewable energy schemes. This comes after a failed funding process in 2023, which saw the budget for renewable energy auctions fall short.
Energy Secretary Ed Miliband stated that the additional £500m for the upcoming renewable energy auction demonstrates the government’s commitment towards delivering clean, affordable, and low-carbon electricity to families and businesses. This move comes in the wake of the energy-driven cost of living crisis and the surge in wholesale gas and electricity costs following Russia’s invasion of Ukraine.
Last year’s renewables auction, which allows energy firms to bid for contracts for difference (CfD), failed to attract any new bids for offshore wind power. Energy developers attributed this to the government’s failure to account for the significant increases in costs they had been facing since the wholesale price spike. In response to this criticism, the previous government had increased the budget for the September auction to £1bn. However, the new government has now signaled an even greater commitment to getting new green power generation back on track.
Under the CfD scheme, the “budget” guarantees future prices for both generators and consumers to prevent them from incurring additional costs in the event of a major price shock. When the overall electricity prices rise above the fixed price, the excess money is returned to consumers through their bills. Conversely, when wholesale electricity prices are lower than the agreed price, the Treasury makes up the difference to the generator.
The new budget projections include £1.1bn for offshore wind, representing a £300m increase from the previous government’s plans. The remaining amount of £400m will be allocated to established technologies such as onshore wind and solar (£185m) and emerging renewables like floating offshore wind and tidal (£270m).
According to the Energy & Climate Intelligence Unit, the auction is expected to secure enough offshore wind capacity to save £30-£40 per year on each household’s energy bill in the event of a future gas crisis. However, experts caution that the exact amount of additional capacity will not be known until the conclusion of the auction process.
The government’s recent announcements build upon their lifting of the de facto ban on onshore wind farms in England and the launch of the publicly-owned green power company, Great British Energy. This partnership with the Crown Estate aims to increase new offshore wind capacity off the UK’s coasts.
Energy Secretary Ed Miliband stated, “Last year’s auction round was a catastrophe, with zero offshore wind secured, delaying our move away from expensive fossil fuels and towards energy independence. Instead, we are supporting the industry to build in Britain with the biggest budget yet for this year’s auction. This will restore the UK as a global leader in green technologies and provide the infrastructure needed to boost energy independence, protect billpayers, and become a clean energy superpower.”
The government’s announcements have been widely welcomed by climate campaigners and the sector. Emma Pinchbeck, chief executive of the industry body Energy UK, commented, “The sooner we can get new wind and solar projects up and running, the sooner we can boost our energy independence with clean, homegrown power, reduce our reliance on expensive foreign gas, and protect ourselves from future price shocks. Offshore wind is crucial in achieving the government’s 2030 target, and the majority of this capacity must come from this auction and next year’s. While this remains a significant challenge, it is a step in the right direction and a clear demonstration of the government’s ambitions. Renewables supplied almost half of the UK’s power last year, highlighting their potential to not only generate clean energy but also drive investment, growth, and high-quality jobs across the country.”
