IPCC report underlines urgent need to secure more clean power in upcoming renewable energy auction

“This report highlights the urgent need to take swift, effective, practical action against climate change at a much faster pace and at a far greater scale if we’re to stand a chance of limiting global warming to 1.5°C.

“The deep, rapid and sustained cuts in greenhouse gas emissions which the reports says are essential to avert a climate catastrophe can only be achieved if we accelerate the transition to clean power. As the report notes, increasing finance to attract more investment is vital to achieve our climate change goals, so Governments around the world need to send clear signals to investors to enable this.

“The UK Government has an immediate opportunity to step up by ensuring that this year’s auction for contracts to generate clean power secures the maximum amount of capacity available. Our analysis shows that the current budget is likely to secure less than half of the 5 gigawatts of offshore wind capacity eligible for this year’s auction - and that’s even if there were no other renewable technologies competing with it.

“More clean energy projects have become eligible to compete in this year’s auction since the budget was set, so this should be reflected in an immediate reassessment of the level of funding available. This will bring forward vital new projects as soon as possible to increase Britain’s energy security, cut the need for expensive gas and move us closer towards net zero. Such a move would also allow the UK to retain its position as a world leader in tackling climate change, which remains the biggest single threat to our way of life”.

Last week, the Government announced an overall budget of £205m for this summer’s auction for Contracts for Difference (CfDs). Within this budget, onshore wind, offshore wind and solar energy are competing alongside other established renewable technologies for £170m. Even if there were to be no other bids from any other technologies and offshore wind won all £170m available in its auction pot, it would only secure 1.9GW of new capacity under the maximum bid price set by the Government (the Administrative Strike Price).

If the entire pipeline of offshore wind projects eligible for this year’s auction (5GW) were to be secured, developers would have to bid in at prices even lower than last year’s auction, even though the costs of labour and raw materials have increased by up to 20% since then. This is particularly concerning as some of the projects which won contracts in last year’s auction are now struggling to make their CfD strike prices work due to the huge rise in inflation over the last year. Under the same scenario, if only onshore projects competed, the administrative strike price would only secure 1.9 GW of new onshore wind capacity.

It is likely that Government’s auction design will also lead to missed investments in innovative technologies like floating wind and tidal stream. In the other funding pot (£35m), £10m has been ringfenced to bring forward much-needed tidal stream projects, leaving £25m for floating offshore wind, which is likely to secure only 54MW of new floating capacity, even if no other technologies were to compete in this pot. To secure all 184MW of floating wind capacity which is eligible for this year’s auction - from three potential floating wind farms - our analysis shows that bids would have to be 45% lower than the maximum price set by the Government (the Administrative Strike Price).