UK ministers are being warned that offshore wind projects are at “tipping point” due to huge price inflations.
Carbon Trust’s head of offshore wind Jan Matthiesen told the Observer the UK offshore wind is at a “tipping point” as maximum prices are set too low.
To meet its targets of decarbonising the electricity system by 2035 and achieving net zero by 2050, the government is hoping to rely on near quadrupling of offshore wind from about 14 gigawatts to 50 gigawatts by 2030.
But industry figures warn that offshore wind projects could become economically unfeasible under the current regime. While the offshore wind industry has been hit by inflation, industry say that the government has failed to adjust the scheme that guarantees the price it is paid.
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In the ongoing bidding round, set to conclude in September, the government has established a maximum price of £44 per megawatt hour based on 2012 prices. This pricing structure resembles the previous round, which occurred before many inflationary pressures took effect.
Concerns have heightened, notably with Swedish energy company Vattenfall’s decision to halt operations on the Norfolk Boreas windfarm. This substantial project, intended to provide power for around 1.5 million British households, has been deemed unprofitable by Vattenfall. The matter was brought to the attention of energy secretary Grant Shapps during a recent gathering at Downing Street.
“The maximum prices set are now too low. Last month, we saw Vattenfall withdraw from the Norfolk Boreas windfarm. This may be the first of many if bold and swift action is not taken,” said Matthiesen.
Last week Shapps announced a £22 million increase in government funding for renewables, including an increased budget for solar and offshore wind technology from £170 million to £190 million.
