Thursday 16 November 2023

Renewables Auction Round 6 price increase sparks industry response

Renewables Auction Round 6 price increase sparks industry response

In response to the government's announcement of revised auction strike prices for renewable energy projects in Auction Round 6 (AR6), industry experts have offered their perspectives.

The 30% increase in administrative strike prices for solar power, a 66% increase for onshore wind, and a 52% increase for floating onshore wind aim to restore confidence in the Contracts for Difference (CfD) regime.

Simon Virley, Vice Chair and Head of Energy and Natural Resources at KPMG UK emphasised the critical role of offshore wind in the UK's net zero power system.

Virley noted that the increased auction strike prices align with global challenges faced by the offshore wind sector, such as higher interest rates and supply chain inflation.

Simon Virley said: "If we are to build more offshore wind capacity in line with the government’s 50GW target, then we need to keep attracting the available capital to the UK.

"For this reason, many developers will welcome this move and we should see significantly increased interest in the next auction round."

Greenpeace UK's Policy Director, Doug Parr, regarded the decision as a strategic move to revive the struggling offshore wind industry.

Parr acknowledged the higher prices as necessary to entice developers back to the UK, emphasising that offshore wind remains cost competitive compared to gas.

Doug Parr said: "This is a shrewd decision, and the only way to resurrect the UK’s struggling offshore wind industry. The most recent auction round was a complete and utter failure for the technology, which put our climate targets in serious jeopardy.

"Enticing developers back to the UK with higher and fairer prices could reverse this damage."

Susie Elks, Senior Policy Advisor at E3G, welcomed the government's offer to the renewables sector.

Elks emphasised the announcement as a realistic reflection of global supply chain inflation and changing international investment landscapes.

Faisal Wahid, Senior Consultant at LCP Delta, highlighted the necessity of addressing cost pressures faced by offshore wind developers.

Faisal Wahid said: "This year’s Allocation Round 5 did not address the current cost pressures that offshore wind developers are facing and has blown the government’s offshore wind targets off track.

"To get them back on track, the government needs to procure 23GW of offshore wind in the next few auctions for the developments to be constructed and brought online ahead of 2030."

Chris Hewett, Chief Executive of Solar Energy UK, highlighted the positive impact of the CfD system on the growth of the UK's solar power sector.

Mr Hewett said: "Solar remains the cheapest source of power in the UK, according to the government’s own figures, although lately installation costs have been affected by factors outside the control of the industry, notably the war in Ukraine.

"So it is gratifying that the maximum bid price has been raised by a significant amount, which should bolster growth further towards reaching the capacity target of 70GW by 2035."

Lisa Christie, Interim UK Country Manager for Vattenfall, emphasised the importance of the UK Government's positive signal in understanding market dynamics and attracting investment for offshore wind projects.

Christie said: "It is also important that as much offshore wind capacity as possible is secured to ensure sustainable pricing for billpayers. So the total budget for the next auction round must also enable multiple projects to move forward."

Written by

Sumit Bose

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