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Wind industry on hold after auction flop spooks developers

Matt Oliver
Sun, September 17, 2023

The Ormonde Offshore Wind Farm

Offshore wind farm developers are delaying non-essential work on UK projects after a government renewables auction flopped, with industry sources warning they may be forced to wait until after the next election to get schemes moving again.

At least two major companies are pausing or slowing investment to the minimum pace necessary to keep projects alive, with one describing the current position as a “holding pattern”.

The slowdown comes after confidence was knocked by the disastrous fifth auction round for renewable energy subsidies earlier this month.

No bids were received by offshore wind developers due to what companies said were unrealistically low prices.

Afterwards, wind farm manufacturers said they held positive discussions with Claire Coutinho, the new Energy Security Secretary, but were left bewildered days later by a meeting with Graham Stuart, the Net Zero Minister, who appeared to play down the auction results.

His comments during a meeting on Tuesday left some attendees unsure whether the Government was committed to addressing the issues in next year’s auction, multiple sources said.

Wind farm bosses were unsure if Britain remained committed to finding solutions after a meet with Net Zero Minister Graham Stuart - Chris J. Ratcliffe/Bloomberg

The cloud of uncertainty has spooked developers, who warned there was now little chance the UK will reach its target of 50 gigawatts of offshore wind capacity by 2030.

One executive said: “The target is a joke now. Ministers just haven’t got it. They don’t realise how fundamentally serious the situation is.”

Another executive said they believed ministers had grasped the scale of the problem but were failing to reassure the sector about how they would approach next year’s auction.

“Given the recent results, we need the Government to be putting its arms around the industry,” the executive said.

“But I don’t think anyone is feeling the love right now. It’s bewildering.”

A third source said some developers were now “sitting it out and waiting for the election”.

Polls suggest Labour, which has vowed to turbocharge investment in green energy, is on course to win.

Executives said the results from the latest renewables auction were “completely predictable” but that ministers had refused to budge due to a belief the industry was “crying wolf”.

One director added: “At the moment we are keeping things where they are until we see where the policy landscape ends up.

“Their net zero targets are completely at risk and that should shock them. The question is, why hasn’t it?”

The Government’s bid to reach 50 gigawatts of capacity will be significantly harder following the disappointing renewables auction round.

Only 14 gigawatts are currently operational, another 7 gigawatts are under construction while a further 6 gigawatts have been granted subsidies but are not guaranteed to be built.

Industry sources say that there are only four more of the annual auction rounds left to secure the remaining 23 gigawatts needed.

This also assumes all of the projects with subsidies already will proceed to development.

However, rising prices and supply chain delays have thrown that assumption into doubt.

Swedish giant Vattenfall announced in July it had been forced to halt work on its 1.4 gigawatt Boreas wind farm, off the coast of Norfolk, due to a 40pc jump in costs.

Danish company Ørsted is also expected to make a final investment decision on its 2.8 gigawatt Hornsea 3 project by the end of this year.

The failure to secure any offshore wind projects in last month’s auction is likely to exacerbate supply chain problems, executives said, because it will create a gap in the UK’s pipeline of work and make suppliers more likely to commit to projects elsewhere.

“If developers aren’t bringing forward projects, they’re not buying turbines, they’re not buying blades, they’re not buying all the other pieces of kit that go into an offshore wind farm, and that’s a problem for suppliers, who have to commit investment to factories,” a source said.

A Department for Energy and Net Zero spokesperson said: “Our latest renewables auction was a success, delivering a record number of clean energy projects and generating enough electricity to power the equivalent of two million homes. The next auction is scheduled to open in only six months’ time, minimising the risk of any delay to deployment of offshore wind.

“We remain fully committed to delivering 50GW of offshore wind capacity, including up to 5GW of floating wind, by 2030 – building on our status as a world leader in the technology with the four largest operational wind farms in the world on UK shores.”