The first green energy subsidy auction to be held for two years is expected to pave the way for an offshore wind energy boom, as the costs of building renewable farms out at sea tumble faster than experts predicted.
OFFSHORE WIND ENERGY AUCTIONS
The Government has set a £730m budget for three auctions for emerging renewable technologies by 2019. Additionally it has ruled out pouring any more funds into onshore wind and solar energy.
The first of the three, a £290m auction, will kick off this week. It is expected to show that the decline in costs is about a decade ahead of schedule.
Ben Warren, a partner at EY, said the “huge interest” in the auction should cut the cost of offshore wind energy by a quarter from previous winning bids.
“I wouldn’t be surprised if we saw a dramatic reduction in costs to below the £85/MWh target set by Government for 2026,” he said.
“This puts the technology nine years ahead of schedule. These results will really call into question the affordability of nuclear and some of the large tidal projects,” Mr Warren said.
“In a really competitive process it’s all about how well a developer can manage its costs, so it will favour the more experienced players,” he said.
“I have no doubt that Dong Energy and other European majors will be fighting tooth and nail for contracts,” he added.
UK’S PUSH FOR OFFSHORE WIND ENERGY
Dong, the state-backed Danish company, has benefited more than any other developer from the UK’s push for offshore wind energy. However, in the new auction it will face stiff competition from offshore wind developers including the RWE subsidiary Innogy and Spain’s EDP Renewables.
Emma Pinchbeck, the executive director of Renewable UK, said she expects offshore wind developers to offer the best value for money. In order to achieve this, undercutting competition from biomass plants and wave and tidal power, which will also be vying for funding, is expected.
The cost of offshore wind energy has fallen by a third since 2012. This means the subsidy price is likely to fall well below the price to be paid to nuclear developers, she said.
“As these auctions are set to prove, UK offshore wind is a force to be reckoned with,” Ms Pinchbeck added.
Source: The Telegraph – 1 April 2017