In an effort to spur investment in a sector beset by crises and vital to meeting its climate targets, the UK government increased the support price for new offshore wind farms by 66%.
Increase In Electricity Bill
The greater support level will result in higher household electricity bills and prices, which is a trade-off that policymakers have agreed to in order to decarbonize. The offshore wind industry has been in crisis globally, and the UK’s most recent set of auctions failed to obtain any projects as developers refused to invest in the nation due to growing expenses that were eating away at revenues.
The maximum guaranteed price for the upcoming auction has been raised from £44 to £73 ($91), which supports a previous story from Bloomberg News. Renewable energy is still the most affordable source of energy, even though consumer bills will be the source of support.
Funds taken from bills, which are already close to historic highs, would be used to subsidize wind-farm developers up to their agreed-upon “strike price,” which may be less than the maximum.
The government wants to reestablish Britain’s clean-power policy after the previous round of auctions failed and placed targets at risk. Two massive auctions will be required to meet the UK’s 2030 offshore wind energy target of 50 gigawatts in order to prevent a negative year for the industry.
Operating Cost Are Higher
As per the regulations, the government establishes a maximum amount that no bidder may over. When operating costs are higher, projects must reimburse consumers via their energy supplier for any profits over that threshold; if prices drop, families make up the difference.
Since the first CfDs were issued in 2013, when projects were given contracts between £140 and £155 per megawatt hour, prices for offshore wind have dropped significantly. The competition for building projects caused prices in 2022 to drop as low as £37.35.
However, because of the severe inflation, some developers found it difficult to fulfill their obligations. Vattenfall AB postponed plans for a wind farm in the North Sea in July due to a 40% increase in expenses.