The UK handed green power deals to some of the world’s largest offshore wind projects in an auction that yielded a record 11 gigawatts in new renewable energy.
Fixed-bottom offshore wind projects totalling just under 7 GW were the winners of 15-year contract-for-difference (CfD) power deals, including Orsted’s Hornsea 3, the Danish developer’s largest so far, at just shy of 2.9 GW.
The other winning offshore projects were ESB and Red Rock’s 1.1 GW Inch Cape, Iberdrola’s 1.4 GW East Anglia 3, Vattenfall’s 1.4 GW Norfolk Boreas and Ocean Winds’ 290 megawatt Moray West scheme.
The fixed-bottom offshore projects came in with “strike prices” of £37.35 per megawatt hour at 2012 prices ($44.6 per MWh), below the £39.65 per MWh seen in the last round in 2019.
Adjusted for inflation that equates to about £46 per MWh.
The fall below the lowest rate of £39.65 per MWh seen at the last auction in 2019 — continuing the historic downward trend in UK green power costs — confounded expectations that inflationary pressures bearing down on the wind industry and its supply chain could cause prices to rise this time.
Industry group RenewableUK pointed out that power has been trading at above £150 per MWh for much of this year.
Floating wind contract
The UK also awarded a historic first floating wind contract — WaveHub’s 32 MW TwinHub project — which came in at a strike price of £87.3 per MWh.
The government gave deals to 900 MW of onshore wind and 2.2 GW of utility-scale solar as they returned to the UK CfD scheme for the first time since 2015.
Renewable UK deputy chief executive Melanie Onn said: “Today’s record-breaking auction results show that there is a way to replace unaffordable gas with low-cost clean power generated by a wide range of renewable technologies led by wind, both offshore and onshore.
“Thanks to the rapid construction times of new onshore wind and solar sites, bill payers will start to feel the benefits of today’s auction next year.”
The UK power deal for the 2.9 GW Hornsea 3 mega-project clears the way for Orsted to create what is billed as the “world’s largest offshore wind zone” off eastern England.
Orsted deputy chief executive Martin Neubert said the Danish group remained “fully committed to financial discipline” with the bid.
“The strike price is inflation-indexed and the contract comes with a level of merchant flexibility. We have already secured capacity with key suppliers for around two thirds of Hornsea 3’s capital expenditure,” Neubert said.
“Also, we can unlock significant synergies by taking a global portfolio view in procurement and by utilising Hornsea 3’s size and location adjacent to our existing UK east coast wind farms with close to 4 GW in operation.”
Hornsea 3, which Orsted expects to bring into service in 2027, could be the subject of a final investment decision by the end of this year.
The project — Orsted’s largest globally so far and costing some £8 billion — has had a bumpy ride through the consenting system over fears it may harm birds.
When combined with the existing Hornsea 1 and 2 projects, it will create “the world’s largest offshore wind zone covering the power consumption of approximately 5 million UK homes”, the developer said.
Orsted is already advancing its Hornsea 4 project, which could add another 2.6 GW, through the UK planning system.
Along with developments such as Equinor and SSE’s Dogger Bank and Iberdrola’s East Anglia Hub, the Hornsea projects are crucial to offshore wind-led industrial revival plans on the eastern side of the UK.
The projects auctioned this week will play a key role in meeting the UK government’s wider ambitions of seeing 50 GW of offshore wind power installed by 2030, which is about five times higher than where it stands today.
Prime Minister Boris Johnson — who was forced into announcing his resignation today after a long-running domestic political crisis — has consciously tied himself to offshore wind as a political symbol of industrial regeneration in north-east England, an area where he achieved electoral success, and regularly boasted of his ambition to make the UK “the Saudi Arabia of wind power”.
(A version of this article first appeared in Upstream’s renewable-energy sister publication, Recharge, on 7 July, 2022.)
- UK legislation to stop ‘undesirable’ owners from entering Oil & Gas and CCS sectors
- 12 dead, four saved, 14 still missing after China offshore wind installation vessel sinks
- Japan seeking to increase competition in offshore wind sector
- Equinor eyes offshore wind farm to boost power-from-shore drive off Norway
- Seaway 7 in pole position for UK offshore wind farm prize