No new offshore windfarms will go ahead in the UK after the latest government auction, in what critics have called the biggest clean energy policy failure in almost a decade.
None of the companies hoping to build big offshore windfarms in UK waters took part in the government’s annual auction, which awards contracts to generate renewable electricity for 15 years at a set price.
The companies had warned ministers repeatedly that the auction price was set too low for offshore windfarms to take part after costs in the sector soared by about 40% because of inflation across their supply chains.
The government’s “energy security disaster” means the UK may miss out on billions in investment and may also push up bills for working households, the Labour party said.
Up to 5 gigawatts of offshore wind was eligible to compete, which could have powered nearly 8m homes a year. That would have saved consumers £2bn a year compared with the cost of using electricity generated in a gas power plant, according to the industry group Renewable UK.
The government confirmed on Friday that only 3.7GW of new clean energy projects secured a contract, in a significant blow to the UK’s clean energy targets.
The winning projects include solar farms, onshore windfarms, the first geothermal schemes and a record number of tidal power. Nevertheless, the absence of giant new offshore windfarms will make the UK’s climate targets far more difficult to achieve.
Industry insiders said the three offshore wind developers behind these plans – SSE, ScottishPower and the Swedish company Vattenfall – were forced to sit out the bidding after ministers refused to heed their warnings.
The industry warnings intensified after Vattenfall said in July that it would cease working on the multibillion-pound Norfolk Boreas windfarm because rising costs meant it was no longer profitable.
Keith Anderson, the chief executive of ScottishPower, said: “This is a multibillion-pound lost opportunity to deliver low-cost energy for consumers and a wake-up call for government.
“We all want the same thing – to get more secure, low-cost green offshore wind built in our waters,” Anderson said. “But the economics simply did not stand up this time around.”
Ed Miliband, the shadow energy security and net zero secretary, said: “The Conservatives have now trashed the industry that was meant to be the crown jewels of the British energy system – blocking the cheap, clean, homegrown power we need.
“Ministers were warned time and again that this would happen but they did not listen. They simply don’t understand how to deliver the green sprint, and Rishi Sunak’s government is too weak and divided to deliver the clean power Britain needs.”
Sam Richards, the founder and campaign director of Britain Remade, which campaigns for economic growth in Britain, said the “catastrophic outcome” of the auction was “the direct result of the government’s complacency and incompetence”.
He said: “This will condemn consumers to higher bills than necessary and means Britain loses out on vital jobs and billions in investment.”
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Graham Stuart, the energy and climate change minister, said the government was delighted that the auction had secured “a record number of successful projects across solar, onshore wind, tidal power and, for the first time, geo-thermal”.
Stuart said the government would work with the offshore wind industry to retain the sector’s global leadership.
The government has been heavily criticised for its record on green energy policy, which has included blocks on onshore wind, the solar industry, and low levels of home insulation.
Greenpeace described the outcome of the latest auction as “the biggest disaster for clean energy policy in the last eight years” because it risked jeopardising the UK’s plan to triple its offshore wind power capacity by 2030, and cast doubt on Britain’s climate targets.
Richard Sandford, the co-chair of the Offshore Wind Industry Council, said lessons must be learned so future auctions could bring forward new offshore windfarms. “It’s clear that this year’s auction represents a missed opportunity to strengthen Britain’s energy security and provide low-cost power for consumers,” he said.
“Our plans to accelerate the growth of this innovative sector in the years ahead remain ambitious and undimmed. We will continue to work with ministers to build up a world-class domestic offshore wind supply chain around the UK, creating tens of thousands of jobs and attracting billions in private investment, as well as providing further opportunities to export our products and expertise globally.”
Solar power made up half of the clean energy capacity to win at the auction. Almost 1.5GW of onshore wind capacity secured a contract in the auction, the tidal power sector secured a record capacity of more than 50MW. There were also three winning projects for geothermal power for the first time, totalling 12MW of capacity.