The price of offshore wind power in the UK has fallen to an all-time low, which could ease the pressure on future household energy bills.
Following the biggest ever UK renewables auction, the government said on Thursday the contract price for windfarms was nearly 6% lower than the previous auction, despite the rising cost of materials to build windfarms.
A string of new contracts should add about 7 gigawatts of clean power capacity to Britain’s turbine fleet by 2026. The government hopes to have 50GW by 2030 and has embarked on a push to expand Britain’s renewables industry in the face of rocketing fossil fuel prices.
Russia’s invasion of Ukraine has exacerbated an already volatile oil and gas market and left countries scrambling to shore up their energy supplies.
UK ministers have been forced to ask coal-fired power plants to continue their operations through the winter for fear of blackouts caused by energy shortages.
However, renewable energy including wind power is seen as central to Britain’s goal of hitting net zero carbon by 2050.
Offshore windfarm operators will sell power for as little as £37.35 per megawatt hour, 5.8% below the lowest bid in the most recent auction in 2019.
The “contracts for difference” guarantee wind-power companies fixed prices to sell electricity for the following 15 years. If the market price falls below the contract price, the government subsidises the difference. If the market is higher, the companies pay money back to the government.
Since wholesale energy prices began to rocket last year, windfarms have begun paying back money to the government.
The easing of an effective moratorium on new onshore windfarms – which was imposed in 2015 – meant onshore wind and solar energy were both included in an auction for the first time in seven years. Onshore wind is now about 45% of the price secured in the auction in 2015.
Among the winners from the auction were the Danish power company Ørsted, Scottish Power and Sweden’s Vattenfall.
Ørsted landed the contract for the world’s biggest offshore wind project, at Hornsea Three, 100 miles (160km) off the east Yorkshire coast. It is hoped the project will produce enough renewable electricity to power 3.2m UK homes.
Scottish Power secured a contract for the East Anglia Three offshore wind project, five onshore wind projects and 10 solar sites. Vattenfall agreed terms for the Norfolk Boreas offshore windfarm, which it said would meet the needs of about 1.5m homes.
It is hoped the projects will help to eventually bring down bills for consumers, which are expected to top £2,800 from October.
The business 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.”
Separately on Thursday, the National Grid laid out the biggest investment plan in the UK’s electricity network since the 1960s. In the £54bn upgrade connections to the grid for offshore windfarms will be coordinated for the first time.
National Grid’s electricity arm proposed 15 connection points to bring 18 offshore windfarms to land. Most offshore wind projects have their own connection to the grid. National Grid hopes to reduce costs and cut down disruption for coastal residents by reducing the number of cables and pylons needed.
The Scottish Power chief executive, Keith Anderson, urged the government to speed up the task of approving renewables projects and connecting them to the grid. “There is massive public support for the goal to hit net zero. There is a need for speed. The planning system itself is OK but it’s about getting the process more quickly,” he said.
Gareth Miller, the chief executive of consultancy Cornwall Insight, said: “As consumer bills rise to unprecedented levels, these results show the value that renewables can play in driving down the cost of power generation, decoupling electricity bills from gas prices, and all in an environment currently where high gas prices are setting the electricity price in the market.
This week, the Queen’s property manager, the crown estate, identified five areas off the coasts of Cornwall and Pembrokeshire that could host floating windfarms.
