United Kingdom

United Kingdom

UK industry welcomes £730m for renewables

UK: In the 2016 UK budget, Chancellor George Osborne allocated £730 million (€935 million) for auctions "to back renewables" offering some clarity for the offshore industry.

George Osbourne delivered the 2016 budget to parliament today
George Osbourne delivered the 2016 budget to parliament today

In his statement to the UK parliament, Osborne said: "The energy secretary [Amber Rudd] and I are announcing £730 million in further auctions to back renewable technologies."

The budget report says: "The government will auction Contracts for Difference of up to £730 million this Parliament for up to 4GW of offshore wind and other less established renewables."

It also gave further detail of the budget for the first auction, expected in 2016: "[A] first auction of £290 million. Support for offshore wind will be capped initially at £105/MWh (in 2011-12 prices), falling to £85/MWh for projects commissioning by 2026. The government will continue to control costs on consumer bills – further details will be announced in the autumn," it read.

In November, Rudd promised three contract for difference auctions by 2020 for offshore wind "if, and only if, the government's conditions on cost reduction are met".

Reaction

The offshore wind industry has replied with a generally positive response, thankful some clarity on another CfD auction has finally been given.

RenewableUK deputy chief executive Maf Smith said: "We welcome the Chancellor's announcement that funding will be available for future rounds of competitive auctions to support offshore wind farms. The budget is tight but we're up for the challenge. We're confident that today's announcement will deliver 3.5GW of new offshore wind capacity between 2021 and 2025.

"This budget shows that offshore wind will be cheaper than new nuclear power and competing with gas by 2025, making it even better value for money. The industry is playing its part continuing to drive down costs relentlessly – we released a report this week showing in detail how we're ahead of what was predicted.

"Today's announcement will increase confidence, attracting billions of pounds of investment in the UK's supply chain. It's such a long term commitment which will keep the UK as the number one destination in the world for investors in this technology."

The total budget for the first auction of CfDs awarded in February 2015 was £325 million and 1.9GW of wind won support deals.

Developers have welcomed the news but highlight the lack of detail still missing from the government announcement.

Dong Energy is developing the Hornsea Zone projects, which would likely seek support from CfD auctions.

A UK spokesperson said: "A long-term industry like offshore wind, and its supply chain, needs clarity on future energy policy in order to take investment decisions on projects which will be operating for many years to come. Dong Energy is working hard to build a robust UK supply chain and maximise UK content in our projects."

RWE Innogy is also developing the Triton Knoll project off the UK's east coast which could bid for CfD support. It said: "We welcome the new information regarding budgets, however we now need some more detail about the relevant delivery years for the first auction, along with the details of the trajectory for the reduction from £105 to £85, in order to understand the full impactions of what has been announced."

However, offshore all-rounder RES questions the continued lack of onshore support by the Conservative government: "If the Government is serious about achieving best value for money for consumers, it makes absolutely no sense to allocate money to only the most expensive technologies, adding billions of pounds to the cost of new energy generation. The cheapest renewable technologies should not be excluded from the auctions. Onshore wind is already below £85/MWh," said RES managing director of western Europe, Gordon MacDougall.

Manufacturer and leading offshore turbine supplier Siemens said the industry's hard work cutting costs is paying off. "What we are taking heart from is the signal from the government of a commitment to offshore, and that the work we've been doing with the rest of the industry to get the cost down so that we aren't reliant upon subsidy has been worthwhile, and can continue," a spokesman said.

The oil and gas sector was also given a boost. Osborne cut in half the supplementary charge on oil and gas from 20% to 10% and said he was "effectively abolishing" petroleum revenue tax.

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