UK unveils biggest round of clean energy subsidies

UK has unveiled its biggest round of clean energy subsidies, including for 10 onshore wind projects, signalling a revival for a sector has been virtually banned in the UK in recent years.

Subsidies, known as “contracts for difference” were also given for 7 gigawatts of offshore wind, and for new technologies such as floating wind and tidal energy.

The results showed that offshore wind has become the cheapest form of clean energy in the UK, beating solar and onshore wind as the least expensive type of renewable power.

The subsidies will underpin 11GW of power, which is equivalent to the total capacity of all the UK’s offshore wind operating today, if all the projects listed are built.

Ørsted, Vattenfall, and Scottish Power were among the winners of the offshore wind subsidy contracts, which extend for 15 years from the time the project is delivered.

Kwasi Kwarteng, business and energy secretary, said the auction award would provide as much power as around six gas-fired power stations.

“The more cheap, clean power we generated within our own borders, the better protected we will be from volatile gas prices that are pushing up bills,” said Kwarteng.

Aris Karcanias, head of energy and utilities at PA Consulting, said that the outcome was “astonishing” and “more than anyone could have anticipated”.

“Offshore wind is now one of the cheapest forms of energy,” he said.

Onshore wind, which was excluded from earlier subsidy awards, has also made a comeback, securing nearly 900MW of projects.

RenewableUK, the trade body for clean energy, estimated the projects awarded would draw around £17.8bn in investment.

Spokesman Luke Clark said that including floating wind and tidal energy in the round would boost these new forms of power.

“These are technologies the UK has been developing for years, and we are now at the point where we can really scale up and invest, said Clark.

Under the CfD system, developers are guaranteed a minimum “strike price” for the electricity they sell. But they have to pay back into the pot when electricity prices are high, so they do not take the gains during periods prices are surging, such as today.

The UK’s award system requires developers to disclose how they will source components, and how much of their project will be sourced in the UK. This clause triggered a legal complaint from the EU at the World Trade Organization earlier this year.

This latest round of the subsidy programme could cost the government more than £230mn annually by 2028, according to estimates provided by the Department for Business, Energy and Industrial Strategy (measured in 2012 currency), although the number could vary significantly depending on power prices.

Supply chain problems and the high cost of commodities such as steel have been a problem for developers of wind and solar projects in recent months.