The maximum strike price has been increased by 66% for offshore wind projects, to £73/MWh, and by 52% for floating offshore wind projects, from £116/MWh to £176/MWh ahead of the next contracts for difference (CfD) auction round, slated to open for bids in March 2024. ‘This will help ensure projects are sustainably priced and economically viable,’ states the UK government.

This year’s auction secured no bids at all from the offshore wind sector as the £44/MWh strike price was not deemed high enough to make projects financially viable. Increased development and construction costs have been hitting the sector hard, with a number of projects being shelved in recent months, including Vattenfall’s 1.4 GW Norfolk Boreas offshore wind farm which had seen project costs increase by up to 40% due to higher inflation and capital costs.

Offshore wind is also to be given a separate funding pot in the next CfD auction. ‘This will ensure healthy competition among a strong pipeline of projects, helping the UK deliver on its ambition of up to 50 GW of offshore wind by 2030, including up to 5 GW of floating offshore wind,’ according to the UK government.  

It also planned to review applications from the 2025 auction ‘not just on their ability to deliver low-cost renewable energy, but also on how much a project strengthens the environmental and economic sustainability of the industry’. As part of this, a project’s social impact will also be considered – including how supply chains affect jobs and communities.  

The government is also increasing maximum bid prices for other low-carbon technologies – increasing by 32% for geothermal projects (up from £119/MWh to £157/MWh), solar by 30% (from £47/MWh to £61/MWh), and tidal by 29% (from £202/MWh to £261/MWh).

Commenting on the announcement, RenewableUK’s Chief Executive Dan McGrail, said: ‘Ensuring that the UK continues to unlock investment in renewables is critical to improve Britain’s energy security, drive economic growth, support thousands of new green jobs and enable us to continue to create a lowest cost electricity system for billpayers. With intense international competition for investment in renewables, we welcome the strong commitment to the sector shown by government today, which demonstrates that the UK is intent on remaining a global leader in offshore wind, as well as innovative technologies like floating wind and tidal stream.’

According to McGrail, there is the potential for the government to attract a record level of private investment in offshore wind projects next year, with at least 10 projects likely to be eligible, able to power 8.5 million homes each year and reduce the UK’s need for gas by 39%. He also noted that: ‘Although renewables haven’t been immune from the recent rises in financing and supply chain costs which all major infrastructure projects have faced, they remain the lowest cost means of generating new electricity. Even at these new prices, there is still no cheaper way to meet the UK’s rising electricity demand and increase our energy security.’

Meanwhile, Emma Pinchbeck, Energy UK’s Chief Executive, added: ‘Offshore wind is the flagship technology for the UK in terms of meeting our net zero targets. It’s also a critical one to ensuring our energy security through generating more clean domestic power – at the same time as boosting our economy and creating jobs. So we very much welcome the government responding to the increased global competition and the economic challenges facing developers by showing more ambition and giving greater confidence to investors.’

The news also received a positive response from some environmental campaigners. Greenpeace UK Policy Director Doug Parr said: ‘This is a shrewd decision, and the only way to resurrect the UK’s struggling offshore wind industry. The most recent auction round was a complete and utter failure for the technology, which put our climate targets in serious jeopardy. Enticing developers back to the UK with higher and fairer prices could reverse this damage. Even with this new ceiling price, offshore wind will remain vastly cheaper than gas.’  

Unlocking new UK offshore wind capacity

In other UK wind developments, The Crown Estate is taking steps to enable the generation of up to an additional 4 GW of green electricity from several offshore wind farm projects in development, within the timeframe of the UK government’s offshore wind target of 50 GW by 2030. This follows requests from the developers of seven offshore wind farm projects (Awel y Môr, Dudgeon Extension, Sheringham Shoal Extension, North Falls, Five Estuaries, Rampion 2 and Dogger Bank D) who believe additional capacity can be generated from the areas of the seabed they hold existing rights for.

In considering the requests, The Crown Estate says it ‘will balance the economic and clean energy potential of these projects with its commitments to nature and biodiversity and duty to make the most effective and efficient use of a valuable, but increasingly busy, seabed’.  

The UK is reportedly the second largest offshore wind market in the world, generating 24% of global offshore wind capacity and currently delivering 14% of the UK’s total electricity requirements.

Global offshore wind patents on the rise

Meanwhile, looking further afield, a new report from the International Renewable Energy Agency (IRENA) and the European Patent Office (EPO) suggests that global offshore wind patents are on the rise.

Noting that global renewable power capacity must triple by 2030 to keep the 1.5°C target of the Paris Agreement within reach, requiring offshore wind capacity to reach almost 500 GW in 2030 (a 14-fold increase in comparison to 2020), the Offshore Wind Energy Patent Insights Report shows that between 2002–2022 patent filings for offshore wind technologies have grown on average by 18%. This growth stagnated between 2014–2017 but, in recent years, has witnessed a sharp increase in filings.