UK Renewables Groups Demand Better Auction Terms for Offshore Wind

The British renewable-energy trade groups RenewableUK, Energy UK and Scottish Renewables are urging the British government to make deep changes to their annual clean power auctions, known in the business as Contracts for Difference (CfDs). The groups warn that without changing the current focus on minimum price, Britain's renewable-energy plans could founder on rising equipment and installation costs. The message and tone differ markedly from the optimism the industry projected just a few years ago, reflecting its changing fortunes in a high-cost, high-inflation environment.  

In a letter, the groups warned that continuing to focus auction criteria on the lowest possible strike price (bid) would create a "less attractive investment environment in the UK" relative to other global markets. The need to focus on minimum price conflicts with the "reality of project costs and investment needs," particularly for companies in the renewables supply chain, which have been losing money from price pressure exerted by the auction format. 

“The latest CfD has failed to account for an increasingly challenging economic environment and there is a real risk that this summer’s auction will fail to secure this much needed industry investment," said Andrew MacNish Porter, Policy Manager at Scottish Renewables. "We urge the government to reassess the parameters of this year’s auction immediately as well as consider longer term reforms."

The UK government launched a review of the CfD auction process in April with an intent to examine measures to boost domestic green jobs. The review also aimed to "ensure renewable energy developers can make the necessary investment in supply chains and innovation," according to UK energy minister Graham Stuart. However, the CfD is still centered on the "overriding priority for the UK to have amongst the cheapest wholesale electricity prices in Europe."

The UK may want low energy prices, but it has to compete for developers' attention on a global market, the three groups warned - and some competitors are offering subsidies. The trade associations noted that the US and the EU have both enacted financial incentives and favorable regulations for developers and their suppliers. 

The groups asked for three changes. First, they petitioned the government to raise its subsidy budget for this summer's auction round by a factor of at least 2.5 and set aside a dedicated pot for fixed-foundation offshore wind. Second, they called for dedicated set-asides for tidal and floating wind power. And third, they asked for a clearly-communicated formula setting out how auction terms will change to match changes in the economy and the supply chain. "A clear schedule with auction parameters, budgets and capacity targets would provide a clear roadmap towards net zero," they argued. 

"International competition for investment in clean tech has never been more intense, so ministers have to act quickly. Time is running out, not only to secure new renewable projects in the coming months, but also to set up a framework for the rest of this decade to ensure that longer term investments in manufacturing come to the UK instead of going overseas," said RenewableUK’s Executive Director of Policy and Engagement Ana Musat.