Rising costs prompt UK to boost offshore wind price guarantees

Britain will increase the guaranteed price offered for offshore wind projects in this year’s renewables auction by 11 per cent, government documents showed, amid rising costs for projects due to inflation and supply chain bottlenecks.

The deeply unpopular Labour government is facing mounting pressure from opposition parties over the affordability of its "net-zero" plan and following a 66 per cent rise in the prices offered for offshore wind during last year’s auction.

"Renewable technologies continue to face macroeconomic uncertainty and supply chain constraints, this is particularly true for wind technologies," the Department for Energy Security and Net Zero (DESNZ) said in a document published late on Wednesday.

The country has put offshore wind at the heart of its plans to "decarbonise" its electricity sector by 2030. It aims to boost capacity to 43-50 gigawatts (GW) by the end of the decade, from around 15 GW currently.

In Britain’s annual renewables auctions project, developers bid for contracts-for-difference (CFD), which offer them a guaranteed price for their electricity and act as a subsidy to make these projects commercially viable when they otherwise aren't.

If wholesale prices go below the guaranteed level, or strike price, the government makes up the difference with this cost ultimately recovered by levies on consumer bills. If wholesale prices are below the strike price, the developers pay back the difference.

Offshore wind projects will be offered a strike price of £81 per megawatt hour (MWh) in 2012 prices, up from the £73 per MWh offered in last year’s auction.

Floating wind projects, the technology for which is at an earlier stage of development, will be offered at £194 per MWh, up from £176 previously.

A spokesperson for DESNZ said the announced strike prices are indicative and the auction could clear at lower levels.

"The only way we can get bills down for good and protect families and businesses from volatile gas prices is by moving to a clean power system with homegrown, secure power that we control," the spokesperson said.

Application rounds for the auction, called AR7, will begin in August with the results announced between December and the end of February 2026.

(Reporting by Susanna Twidale, editing by Ed Osmond)