Tuesday 24 October 2023

Offshore wind auction failure may hike wholesale energy prices by 20%

The most recent UK offshore wind auction has raised concerns about the country's ability to achieve its climate targets, which could result in significantly higher power prices and increased carbon dioxide emissions.

That's according to new analysis by academics from Imperial College London, in collaboration with Drax Electric Insights.

Inflationary pressures led to the auction's inability to secure new offshore wind projects, as the upper price limit set by the Contracts for Difference (CfD) scheme was considered too low.

The UK Government had aspired to procure up to 5GW of power through the auction to contribute to its goal of installing 50GW of offshore wind capacity by 2030.

A special report addressing the consequences of the auction, Drax Electric Insights, suggests that the effects of this setback could persist into the future.

Analysts note that later in this decade, there is a risk of an annual electricity generation shortfall of 26 terawatt-hours (TWh).

This gap is likely to be filled by an increased reliance on gas and electricity imports from abroad, leading to an estimated additional six million tonnes of carbon dioxide emissions and more than a 20% surge in wholesale electricity prices.

The report's authors argue that the current framework's overreliance on wind energy means that the UK is "heavily dependent on a single technology for decarbonising the country's electricity system."

They propose adopting a more balanced approach, in which various low carbon technologies share the responsibility for achieving decarbonisation.

Dr Iain Staffell of Imperial College London, and lead author of the quarterly Drax Electric Insights report series, said: "The UK has to triple its offshore wind capacity in just seven years to meet the government’s target. With the auction delivering no new capacity, there’s now a huge shortfall and the goal is looking increasingly unattainable."