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Price of offshore wind power falls to record low

Hundreds of new turbines will be built as part of the latest auction (Gareth Fuller/PA)
Hundreds of new turbines will be built as part of the latest auction (Gareth Fuller/PA)

The price of offshore wind power has fallen to a new record low, as the Government announced 11 gigawatts of winning bids for various renewable technologies.

The Government said it has secured a record amount of renewable power in its flagship auction scheme.

Companies have won the right to build 11 gigawatts (11GW) of on- and offshore wind, solar and floating offshore wind and tidal energy.

That is enough to power around 12 million homes, according to officials.

The so-called contracts for difference (CfD) auction sets a guaranteed price that each project will be paid for every megawatt hour (MWh) of energy it produces. This is called the strike price.

If the price of electricity on the open market is lower than that, subsidies will kick in to top up payments to companies.

But if the price is higher – as at the moment – companies will have to pay back the difference.

On Thursday, the cheapest offshore wind farms quoted a strike price of £37.35. The previous record low had been £39.65 – set in 2019.

By comparison, the strike price for the Hinkley Point C nuclear plant is £106.12.

The UK still gets a significant part of its electricity from gas power. As the price of gas soared over the last year, electricity prices have been trading above £150 per MWh, meaning many wind farms are returning cash to customers.

The price of renewable energy has fallen significantly over recent years.

The first CfD auction was run in 2015 and since then the price of offshore wind in the contracts has fallen by nearly 70%.

Onshore wind is also 45% cheaper than it was in the 2015 round – the last time that onshore wind and solar were eligible to be included.

For the first time, the auction included tidal stream technology, with 41MW set to be built, and floating offshore wind turbines, which will provide 32MW of capacity.

These more innovative technologies will be much more expensive, with tidal wind contracts at £178.54 per MWh and floating offshore wind at £87.30.

Business and Energy Secretary Kwasi Kwarteng said: “Eye-watering gas prices are hitting consumers across Europe.

“The more cheap, clean power we generate within our own borders, the better protected we will be from volatile gas prices that are pushing up bills.”

Most of the 11GW of new capacity will be built as wind farms off the coast of Britain. The 7GW of new offshore wind will increase the country’s capacity by 35%.

The Government is aiming to reach 50GW of offshore wind by the end of the decade, helping to power its target of ensuring that 95% of electricity is from low-carbon sources.

At 1.4GW, a new wind farm to be built by Sweden’s Vattenfall off the coast of East Anglia is the second largest single project in the auction round.

Danielle Lane, the company’s UK country manager, said: “Today is a major step forward as we look to create a low-cost, low-carbon energy system.

“This auction firmly places the UK as a superpower of renewable energy, accelerates the delivery of our climate targets and reduces our reliance on expensive, imported gas.”

Denmark’s Orsted will build the single biggest project in the auction – a massive 2.9GW site, the biggest in the world – off the east coast of England.

RenewableUK’s deputy chief executive, Melanie Onn, said: “The cost-of-living crisis and the war in Ukraine have pushed affordability and energy security to the top of everyone’s agenda, with billpayers desperate for relief from fossil fuel price hikes.

“Today’s record-breaking auction results show that there is a way to replace unaffordable gas with low-cost clean power generated by a wide range of renewable technologies led by wind, both offshore and onshore.

“Thanks to the rapid construction times of renewables, billpayers will start to feel the benefits of today’s auction next year.”