Renewable energy auction secures enough power for 11m UK homes

Great Britain’s renewable energy auction has secured enough new clean electricity projects to power 11m UK homes after the Labour government made record funding available to suppliers.

The £1.5bn auction will support 131 new projects including windfarms, solar farms and tidal power projects after ministers increased the amount of funding available to seven times the sums offered last year.

The sixth auction of its kind is expected to bring forward a record-breaking amount of clean energy, at below the cost of running a gas power plant, by giving developers a guaranteed price for each unit of clean electricity they generate. This should eventually mean lower energy bills for consumers.

The success of the closely watched industry auction was considered crucial if the government hoped to achieve its election pledge to double onshore wind, triple solar power and quadruple offshore wind by 2030.

Labour took action weeks after winning the July general election to increase the value of the auction by 50% compared with the funds promised by Conservative ministers. The move aimed to reignite investment in the UK’s clean energy industry after the previous government failed to award a single new offshore wind contract last year or remove the blocks on onshore wind.

However, Tuesday’s auction secured only half the offshore wind capacity needed every year for the rest of this decade if the government hopes to meet its green energy targets. Almost two-thirds of the new offshore wind capacity that was eligible to bid in the auction failed to bid low enough to secure a contract.

Tom Glover, the chief executive of RWE’s UK business, which missed out on an offshore wind contract, said: “It is a little disappointing in the context of the government’s targets that only 30% of eligible new projects won – but this shows how competitive the auction was, which is a good thing for the consumer.

“It means the government will now need to work harder to get more offshore windfarms away in future auctions if it wants to achieve its goal of quadrupling offshore wind capacity to 60GW by 2030.”

The bulk of the funding was awarded to 5GW of offshore windfarm capacity, or enough to generate clean electricity for more than 3m UK homes before the end of the decade. The nine projects were awarded a lower than expected contract price of between £75 a megawatt-hour and £82/MWh in today’s prices.

These prices are below the typical price of electricity in the wholesale power market, which now stands at £84/MWh – and well below the guaranteed price of £128/MWh for new nuclear plants.

Keith Anderson, the chief executive of Scottish Power, which won contracts to support enough new offshore wind to power 1m UK homes, said: “We can debate whether 5GW of offshore wind is enough, but the important thing is that we are moving forward. This has proved that last year’s failure was a blip and that the auction process works. It should give the government confidence that it can be more ambitious in future auctions.”

The auction also awarded contracts to about 90 new solar farms with a total capacity of 3.3GW at a price of about £69/MWh, and 22 new onshore windfarms with a total capacity of almost 1GW at a price of about £71/MWh.

Tidal power developers secured contracts for six new projects at a price of £240/MWh, and the world’s largest planned floating offshore windfarm also clinched a contract for £194/MWh.

Ed Miliband, the energy secretary, said: “Today we have now achieved a record-setting round … It is another significant step forward in our mission for clean power by 2030 – bringing Britain energy independence and lower bills for good.”

He added: “This auction has produced a record number of solar projects bolstering our mission for a solar revolution, we have powered forward with onshore wind, secured the largest commercial floating offshore wind project in the world and got the offshore industry back on its feet.”

Dan McGrail, the chief executive of the trade body RenewableUK, said: “After the failure of last year’s offshore wind auction, it was essential that this auction succeeded, and the fact that nine major offshore wind projects have secured contracts will increase investor confidence.

“The government has set a world-leading clean power mission for 2030 and to meet that will need a big step-up from today. The industry stands ready to work with government to make sure that we’re increasing the amount of new renewables coming through each year to the levels needed to meet the clean power mission.”