Record £1.5bn budget for renewables auction round  

The UK government has allocated a record £1.5bn budget to this month’s renewables auction round that will see investment in new green infrastructure as part of Labour’s mission to deliver clean power by 2030, five years earlier than the date set by the previous Conservative government. The government is looking to quadruple the UK’s offshore wind capacity, treble solar capacity and double onshore wind capacity this decade.  

Some £1.1bn is earmarked for the offshore wind sector, an uplift of £300mn and dwarfing the sum available in previous Allocation Rounds (AR) under the Contracts for Difference (CfD) scheme. The government says it is ‘sending a strong signal to industry to invest in UK waters’ following the ‘catastrophic’ AR5 auction where no successful bids were made by offshore wind developers as the strike price of £44/MWh was considered too low to counter the inflationary pressures being felt across the supply chain.  

After no bids were received for offshore projects, the Conservative government announced plans in late 2023 to increase the CfD strike price by 66% for offshore wind projects, to £73/MWh, and by 52% for floating offshore wind projects, from £116/MWh to £176/MW.  

This month’s AR6 auction will also include £185mn for established technologies such as onshore wind and solar, an uplift of £65mn, with £270mn set aside for emerging technologies such as floating offshore wind and tidal, an uplift of £165mn.  

The maximum strike prices under this month’s auction are £73/MWh for offshore wind, £64/MWh for onshore wind, solar £61/MWh, floating offshore wind £176/MWh, geothermal £157/MWh and tidal £261/MWh.

Successful projects will be announced in September 2024.

Responding to the government’s AR6 budget announcement, Energy UK’s CEO Emma Pinchbeck said: ‘It’s a real boost for our clean energy ambitions that the upcoming auction round will now be able to deliver more renewable power. 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 that reduces our reliance on expensive foreign gas and helps protect us from a repeat of the price shocks that have hit customers hard in recent years.’  

She continued: ‘Offshore wind is critical to hitting the government’s 2030 target and we know that the vast majority of this capacity must be delivered through this auction round and next year’s.'

Dan McGrail, Chief Executive of Renewables UK, added: ‘This auction will not unlock investment in all shovel-ready projects, so the government will need to ensure that the next auction rounds focus on project delivery to ensure we achieve the Prime Minister’s clean power mission and increase the confidence of investors in the UK’s supply chain.’

Since taking power last month, the Labour government has already enacted a number of measures intended to speed up the renewables roll-out, including lifting barriers to onshore wind, launching an Offshore Wind Industry Taskforce, reinstating the Solar Taskforce and granting development consent to three large onshore solar farms in the east of England that had previously been blocked by Conservative MPs, and establishing a 2030 ‘Mission Control’ unit led by former Climate Change Committee CEO Chris Stark. It has also formally launched Great British Energy in partnership with the Crown Estate, backed by £8.3bn of new money, which is estimated to create up to 20–30GW of new offshore wind developments reaching seabed lease stage by 2030.

UK oil and gas windfall tax raised and extended

More recently, the UK Chancellor Rachel Reeves announced plans to raise the oil and gas windfall tax (formally known as the Energy Profit Levy; EPL), taking the headline tax rate to 78%. It is also further extending the EPL to 31 March 2030, removing its investment allowance and signalled further reductions in capital allowances. The decarbonisation allowance and the Levy’s price floor – the Energy Security Investment Mechanism – will remain in place.

In reaction, David Whitehouse, CEO, Offshore Energies UK (OEUK) was alarmed by the windfall tax rise and stated: ‘This is not partnership working between government and industry. These announcements have been made without meaningful engagement with this sector.’ He warned that the announcement ‘will only serve to rock confidence further’, adding that it ‘jeopardises jobs in communities across the UK… something the Prime Minister committed in his manifesto not to do’.

Key challenges facing the UK’s clean hydrogen economy

Meanwhile, a new report from the National Physical Laboratory (NPL) outlines the key challenges that need to be addressed to boost the UK’s hydrogen economy and support the government’s net zero by 2050 goals.

These include:

• Reducing the production cost of electrolytic or ‘green’ hydrogen.
• Supporting the rollout of hydrogen storage and distribution infrastructure.
• Developing new test facilities capable of advanced material research to support emerging hydrogen technologies.
• Filling gaps in regulation, technical and measurement standards across the hydrogen value chain.
• Enabling the decarbonisation of different industries by supporting the progression of hydrogen end-use technologies.

The last few years has seen increased investment in the rapid development and rollout of hydrogen technologies in the UK. The new Labour government has committed to channelling up to £500mn into green hydrogen in a bid to deliver clean power by 2030.