The latest government auction of offshore wind farm contracts in the United Kingdom has failed to attract any bidders, highlighting challenges in the country’s clean energy sector.
Inflation, supply chain problems, and rising interest rates have changed the economics of projects. In particular, manufacturing wind turbines has become more expensive as raw material prices have soared because of higher energy costs.
In last year’s clean energy auction, developers bid as low as £37.35 (US$46.58) per megawatt hour. Developers say that the government failed to see the severity of cost pressures, and that the new maximum auction price of £44 per MWh was unrealistic.
In the 2022 auction, the largest amount of capacity, almost 7 gigawatts, was bid for new offshore wind projects. This was seen at the time as taking a significant step towards meeting the government’s 50GW offshore wind ambition by 2030. Meeting that target now looks in doubt.
The latest auction by the UK Department for Energy Security and Net Zero did result in contracts for a total of 3.7GW of solar power, onshore wind and tidal power projects.
Several UK projects signed last year are now running into trouble. In July Swedish energy giant Vattenfall said it was halting work on the huge Norfolk Boreas windfarm, which was planned to power the equivalent of 1.5 million homes. The company will have to make a 5.5 billion krona (US$496 million) writedown on the project.
Meanwhile, Norway-based Orsted revealed that it may have a take a US$2 billion-plus charge on several projects in the United States.