Wednesday, September 27, 2023
Courthouse News Service
Wednesday, September 27, 2023 | Back issues
Courthouse News Service Courthouse News Service

Wind power development grinds to a halt in UK

Development of new wind farms has dramatically stalled in Britain – but the country’s energy needs require the industry's continued expansion.

(CN) — There have been no new United Kingdom bids for offshore wind developments for the first time in over a decade, new figures published Friday revealed, landing a blow to the country’s net-zero emissions and energy security targets.

A recent government auction for new wind developments saw no bidders take part — a major problem for a country that is highly dependent on the expansion of wind power capacity to meet its energy needs.

Amid the fallout from the news, industry figures have pointed to the government's subsidy scheme failing to keep up with rising prices as the root cause for the collapse of the bidding process. In the U.K., the government guarantees developers a set price for clean energy generation, reducing the risk involved in large and costly offshore construction projects.

But guaranteed prices have failed to keep up with rising supply costs, and have not been adjusted for inflation.

Industry body Renewable U.K. described the auction as “a missed opportunity to strengthen Britain’s energy security and provide low-cost power for consumers."

"If all the offshore wind projects eligible to bid into this auction had done so, we could have powered the equivalent of more than five million British homes a year,” the group wrote in press release. “Lessons must be learned to ensure that the parameters of the auction are set correctly in the future."

Before the auction industry figures publicly warned the government that the price guarantee scheme did not reflect the realities of current market conditions. The government’s reluctance to increase price guarantees to fall in line with inflation is consistent with the tight fiscal policy being pursued by the Treasury due to inflationary pressures — and following the market turbulence associated with the short-lived Truss administration.

The auction’s outcome means that less than a third of new renewable capacity has been approved compared to last year’s figures, at a time when British households are struggling with energy costs.

The news follows the announcement that developer Vattenfall was withdrawing from construction of the Norfolk Boreas — one of the biggest offshore wind farms ever planned in the U.K. — and reconsidering its involvement in two further major wind projects. In all three cases, Vattenfall cited spiraling costs and insufficient government guarantees on price as the primary issues.

Wind power has become a major part of the U.K.’s energy mix in recent years. The blustery island nation has some of the best conditions for wind power generation in the world, and Britain has the sixth largest installed wind capacity worldwide.

Whilst onshore wind has been subject to a de facto moratorium since 2015, offshore wind has boomed: 11 of the 15 largest offshore wind farms in the world are located in the U.K.

In 2023, wind power overtook natural gas as the primary source of electricity generation in the U.K., meeting 32% of demand over the first three months of the year. Previously a coal superpower, thanks to wind, the U.K. has been able to almost entirely phase out the use of coal in its energy generation.

However, changing market conditions mean that offshore wind is no longer as cheap as it once was.

High interest rates have made financing such vast infrastructure projects less attractive to private firms. Another issue is commodity prices, with large fluctuations in steel a particular concern. Rising energy prices, general inflation and pervasive shortages have also driven up costs throughout the supply chain.

In addition, the race to construct ever larger turbines to increase efficiency has made construction techniques more expensive and technical. Rapid development of newer and larger models has left large quantities of installation equipment outdated and redundant. Some in the industry are calling for greater standardization of turbines to bring down costs, but competition from rapidly scaling-up Chinese manufactures makes that approach risky for European developers.

Britain has long gotten used to the cost of offshore wind falling. But the perception that the cost of offshore wind is destined to fall in perpetuity goes some way to explaining the disparity between government price guarantees and real market costs.

The botched auction comes as the government is already politically weak on salient issues like the environment and climate change. Recent decisions — such as a bonanza of new government-issued oil and gas licenses, approval of a new coal mine, inaction on household insulation, tax breaks for the aviation industry and rumors of a U-turn on the 2030 petrol and diesel car ban — have created a narrative of a government abandoning its net-zero carbon emissions ambition.

Back in June a well-respected environment minister quit the government, slamming Prime Minister Rishi Sunak’s environmental credentials on the way out and stating that the U.K. had “visibly stepped off the world stage and withdrawn our leadership on climate and nature.”

The sudden suspension of British offshore wind development seems set to amplify voices critical of the government on climate. The opposition Labour Party’s environmental spokesperson, Ed Miliband, labelled the failed auction “an energy security disaster."

“The Conservatives have now trashed the industry that was meant to be the crown jewels of the British energy system — blocking the cheap, clean, home-grown power we need,” Miliband said.

The government argues that its price guarantees to developers are competitive by international standards, and that offshore wind is encountering similar difficulties elsewhere. Indeed, similar problems have arisen in the U.S. over the past year, with major wind projects being postponed or cancelled in states like New Jersey, New York, Massachusetts and Rhode Island.

But few nations are as dependent on offshore wind for energy generation as the U.K., which is targeting a tripling of current capacity by 2030 in order to meet demand.

Whilst the auction did prove fruitful for other renewables such as solar, tidal and for the first time geothermal, continued development of wind remains essential for the country to keep up with its energy needs. Whether the British government is prepared to commit the resources needed to revive the industry remains to be seen.

Categories / Energy, Environment, International

Read the Top 8

Sign up for the Top 8, a roundup of the day's top stories delivered directly to your inbox Monday through Friday.