UK to Offer Wind Developers Significantly Higher Electricity Prices

The UK government will boost its offer for electricity produced from wind farms by 66% at its next renewable energy auction.

The move comes as wind developers complain of higher costs, higher interest rates, and low prices that the government is willing to offer for their electricity.

“We recognise that there have been global challenges in this sector and our new annual auction allows us to reflect this,” Energy Security Secretary Claire Coutinho said, as quoted by Reuters.

“This is a vital part of our plan to have enough homegrown clean energy, bringing bills down for families and strengthening our energy independence,” Coutinho added.

The UK has leaned heavily on wind energy, and especially on offshore wind energy, for its transition to net zero. It has grown to be the world’s second-largest offshore wind market after China, according to Reuters, and there are plans to boost its total offshore wind capacity to 50 GW by 2030. The current capacity stands at some 15 GW, which makes the ramp-up quite an ambitious undertaking.

What makes the situation challenging is the cost inflation that has hit the wind power industry in the past year. Raw material costs are up, and with borrowing costs also higher as central banks seek to rein in inflation, many projects have simply become unviable at the prices that the government was willing to offer in its contracts for difference—the mechanism the UK uses to secure long-term electricity supply deals with wind and solar developers.

These developments have cast a shadow over the argument for continuously falling wind and solar costs but this has not discouraged governments from providing financial support to these industries.

The UK government said it will offer wind developers a strike price of 73 pounds per MWh at its next auction, up from 44 pounds per MWh currently. In U.S. dollars, the price will rise to $90.61 per MWh from $54.53 per MWh.

By Irina Slav for Oilprice.com

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