The annual CfD auction, which sees companies bid for 15-year contracts for renewable energy projects to supply the grid, saw many onshore wind and solar projects allocated contracts.
However, no offshore wind farms were commissioned this time despite it being the backbone of prime minister Rishi Sunak’s decarbonisation plans.
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In April 2022, the UK government set a target of delivering up to 50 gigawatts (GW) of new offshore wind capacity by 2030. The UK currently has 13.7GW of offshore wind capacity in operation, according to trade body Renewables UK.
CfDs were allocated to nearly 7GW of offshore wind projects last year according to Windpower Monthly – including those using either fixed-bottom foundations or floating platforms. However since then, challenges with supply chain delays, inflation, and higher interest rates have increased pressure on offshore wind developers in the UK.
Keith Anderson, renewables developer at ScottishPower, said: “ScottishPower is in the business of building wind farms and our track record is second to none in terms of getting projects over the line when others haven’t been able to.
“But the economics simply did not stand up this time around.”
Sue Ferns, senior deputy general secretary of trade union Prospect, said the results are a “disaster” for the UK's offshore wind industry.
“Businesses and workers stand ready to deliver a rapid rollout of renewables but the government's failure to set sustainable prices is holding the industry back”, she said.
She described it as the “latest sign” in a recent government climb down on green policy issues, and described the government as having “given up on bringing down bills, creating clean energy jobs, and meeting its climate targets”.
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“The CfD framework must be urgently reformed if we are to have any hope of decarbonising the energy system and delivering good jobs in the process,” she continued.
Greenpeace UK’s policy director, Doug Parr described the allocation round as a “monumental failure” and “the biggest disaster for clean energy in almost a decade”.
He said: “Thanks to cost pressures and inept government policy, this auction round has completely flopped - denying bill payers access to cheap, clean energy and putting the UK’s legally binding target of decarbonising power by 2035 in greater jeopardy.
“It leaves the UK more dependent on expensive, imported fossil gas.”
Parr also called for “urgent reforms” to the scheme and “smart changes” in government policy to “unlock private investment and remove planning bottlenecks”.
Onshore wind saw some success in the latest round, with contracts allocated for a total of 1.5 gigawatts of capacity.
There are no targets for onshore wind deployment, however there is currently 14.9 gigawatts of capacity in operation, according to Renewable UK.
Just this week, the government confirmed it would be lifting a ‘defacto ban’ on onshore wind that has been in place since 2015, by making a series of tweaks to national planning policy to ensure the "whole community" has a say over such developments "not just a small number of objectors”.
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More than 50 solar PV projects were allocated CfDs in the latest round, at a total capacity of around 1.9 gigawatts.
Chris Hewett, chief executive of Solar Energy UK, said he was “pleased” with the success for solar this round, as solar has only been included in the CfD allocation scheme since last year, and said that the results showed how comparatively “resilient solar has become to economic shocks”.
He said: “It remains the cheapest way to generate power in the UK. That said, we need to be roughly doubling the pace of solar installations to meet the Government's capacity target of 70GW by 2035.”
Alon Carmel, energy transition expert at PA Consulting, pointed out that the allocations for onshore wind and solar PV are at “significantly higher prices than the maximum price the government had specified for offshore wind”.
He said: “Onshore wind cleared at £52.25/MWh and solar at £47/MWh, but offshore wind was constrained to a maximum of £44/MWh.
“The challenge for offshore wind is that it has to compete with other technologies like onshore wind and solar, but is subject to different price restrictions.”
Eleven tidal stream projects were allocated CfDs in the latest round and three geothermal projects were also allocated in a first for the scheme.
Ryan Law, managing director of Geothermal Engineering Ltd (GEL), the Cornwall-based company which was awarded the contracts, said: “This is a hugely significant milestone in our push to extend the boundaries of what’s possible with geothermal power and heat.
“Securing these CfDs will also provide the necessary financial foundation to allow more substantial investment in the multiple projects that we have planned in the UK.”
The latest round had budget funding of £227 million, and according to the Department for Energy Security and Net Zero (DESNZ) has secured enough to power the equivalent of two million homes.
Energy and climate change minister Graham Stuart described the CfD auction as securing a “record number” of successful renewables projects, with 95 allocated.
Last year 93 were allocated. In total, contracts were allocated to nearly 3.7GW of renewable energy capacity – the lowest amount allocated since the UK's second CfD round in 2017.
Stuart said: “Offshore wind is central to our ambitions to decarbonise our electricity supply and our ambition to build 50GW of offshore wind capacity by 2030, including up to 5GW of floating wind, remains firm. The UK installed 300 new turbines last year and we will work with industry to make sure we retain our global leadership in this vital technology.
He added that in 2010, just 7% of our electricity came from renewables, however in the first quarter of this year it reached 48%.
He continued: “This first annual auction will allow us to go further in powering more of Britain from Britain.”