The UK's new offshore wind auction will raise pressure on Hinkley

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Richard Heap
August 14, 2017
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The UK's new offshore wind auction will raise pressure on Hinkley

This week, the UK Government is due to start the next round of its Contracts for Difference auctions. In this round, the government plans to give £290m financial support for renewables projects that complete in either 2021/22 or 2022/23.

Offshore wind is one of the government’s preferred sectors, along with wave, tidal and geothermal; and it has said that offshore wind farms taking part in this auction should achieve a strike price better than £105/MWh if they complete in 2021/22 or £100/MWh if they complete in 2022/23. We look forward to seeing who triumphs.

The auction is also a chance for offshore wind to hammer a nail in the coffin of flagship nuclear project Hinkley Point C. The project’s developer, the state-owned French utility EDF, has admitted that the scheme is already £1.5bn over budget and might not complete until 2027. This would take the total cost up to over £20bn.

On completion it is set to produce power at a price of £92.50/MWh, which is double the UK’s current wholesale electricity price. This CfD auction is a chance for offshore wind developers to show their projects can match or beat the price at Hinkley. Indeed, Ofgem has said offshore wind farms could be built in UK waters at £70/MWh. This would put pressure on the government to re-think Hinkley.

And, in our view, there is a great chance of an offshore project beating £92.50/MWh this time. We have seen how competitive auctions in Germany have helped developers push prices down to a level where there are now three schemes due to complete in the North Sea in 2025 that do not require government subsidies.

Developers have been reducing the cost of projects across Europe, so why not in the UK too? It may be too early for zero-subsidy but, for now, beating Hinkley is enough.

As comparison, Scottish Power Renewables is building its 714MW East Anglia 1 at a strike price of £119/MWh. This price was agreed in February 2015 and is only 29% more expensive than Hinkley Point C. Well, a lot has happened to reduce costs since then.

One reason we are confident of continued cost cuts in UK offshore wind is the competition. Turbine manufacturers are battling to develop machines that are bigger and more efficient; companies across the supply chain are getting better used to managing the installation of these huge projects; and developers are fighting too.

There are now around 12GW of offshore projects in UK waters with planning consent but no subsidy backing. The developers of those will fight hard for subsidy support.

That 12GW figure was bolstered last week as Iberdrola subsidiary Scottish Power Renewables won planning consent for the planned 1.2GW East Anglia 3 offshore wind farm in the North Sea. East Anglia 3 is set to use Siemens Gamesa’s 7MW turbines, which are over twice as high as Big Ben, and be built 69km offshore.

And, in total, there are 15 projects that make up that almost 12GW according to figures from The Crown Estate. Here they are:

Consented UK offshore projects with no CfD or ROC



We should add that East Anglia 3 is not eligible for this month’s CfD auction, as it is due to complete after 2023 – in 2025, to be precise. But it does show that there are projects in prospect that will help to keep offshore wind in cost-cutting mode. This auction allows the sector to show it is hot on Hinkley’s heels.

This week, the UK Government is due to start the next round of its Contracts for Difference auctions. In this round, the government plans to give £290m financial support for renewables projects that complete in either 2021/22 or 2022/23.

Offshore wind is one of the government’s preferred sectors, along with wave, tidal and geothermal; and it has said that offshore wind farms taking part in this auction should achieve a strike price better than £105/MWh if they complete in 2021/22 or £100/MWh if they complete in 2022/23. We look forward to seeing who triumphs.

The auction is also a chance for offshore wind to hammer a nail in the coffin of flagship nuclear project Hinkley Point C. The project’s developer, the state-owned French utility EDF, has admitted that the scheme is already £1.5bn over budget and might not complete until 2027. This would take the total cost up to over £20bn.

On completion it is set to produce power at a price of £92.50/MWh, which is double the UK’s current wholesale electricity price. This CfD auction is a chance for offshore wind developers to show their projects can match or beat the price at Hinkley. Indeed, Ofgem has said offshore wind farms could be built in UK waters at £70/MWh. This would put pressure on the government to re-think Hinkley.

And, in our view, there is a great chance of an offshore project beating £92.50/MWh this time. We have seen how competitive auctions in Germany have helped developers push prices down to a level where there are now three schemes due to complete in the North Sea in 2025 that do not require government subsidies.

Developers have been reducing the cost of projects across Europe, so why not in the UK too? It may be too early for zero-subsidy but, for now, beating Hinkley is enough.

As comparison, Scottish Power Renewables is building its 714MW East Anglia 1 at a strike price of £119/MWh. This price was agreed in February 2015 and is only 29% more expensive than Hinkley Point C. Well, a lot has happened to reduce costs since then.

One reason we are confident of continued cost cuts in UK offshore wind is the competition. Turbine manufacturers are battling to develop machines that are bigger and more efficient; companies across the supply chain are getting better used to managing the installation of these huge projects; and developers are fighting too.

There are now around 12GW of offshore projects in UK waters with planning consent but no subsidy backing. The developers of those will fight hard for subsidy support.

That 12GW figure was bolstered last week as Iberdrola subsidiary Scottish Power Renewables won planning consent for the planned 1.2GW East Anglia 3 offshore wind farm in the North Sea. East Anglia 3 is set to use Siemens Gamesa’s 7MW turbines, which are over twice as high as Big Ben, and be built 69km offshore.

And, in total, there are 15 projects that make up that almost 12GW according to figures from The Crown Estate. Here they are:

Consented UK offshore projects with no CfD or ROC



We should add that East Anglia 3 is not eligible for this month’s CfD auction, as it is due to complete after 2023 – in 2025, to be precise. But it does show that there are projects in prospect that will help to keep offshore wind in cost-cutting mode. This auction allows the sector to show it is hot on Hinkley’s heels.

This week, the UK Government is due to start the next round of its Contracts for Difference auctions. In this round, the government plans to give £290m financial support for renewables projects that complete in either 2021/22 or 2022/23.

Offshore wind is one of the government’s preferred sectors, along with wave, tidal and geothermal; and it has said that offshore wind farms taking part in this auction should achieve a strike price better than £105/MWh if they complete in 2021/22 or £100/MWh if they complete in 2022/23. We look forward to seeing who triumphs.

The auction is also a chance for offshore wind to hammer a nail in the coffin of flagship nuclear project Hinkley Point C. The project’s developer, the state-owned French utility EDF, has admitted that the scheme is already £1.5bn over budget and might not complete until 2027. This would take the total cost up to over £20bn.

On completion it is set to produce power at a price of £92.50/MWh, which is double the UK’s current wholesale electricity price. This CfD auction is a chance for offshore wind developers to show their projects can match or beat the price at Hinkley. Indeed, Ofgem has said offshore wind farms could be built in UK waters at £70/MWh. This would put pressure on the government to re-think Hinkley.

And, in our view, there is a great chance of an offshore project beating £92.50/MWh this time. We have seen how competitive auctions in Germany have helped developers push prices down to a level where there are now three schemes due to complete in the North Sea in 2025 that do not require government subsidies.

Developers have been reducing the cost of projects across Europe, so why not in the UK too? It may be too early for zero-subsidy but, for now, beating Hinkley is enough.

As comparison, Scottish Power Renewables is building its 714MW East Anglia 1 at a strike price of £119/MWh. This price was agreed in February 2015 and is only 29% more expensive than Hinkley Point C. Well, a lot has happened to reduce costs since then.

One reason we are confident of continued cost cuts in UK offshore wind is the competition. Turbine manufacturers are battling to develop machines that are bigger and more efficient; companies across the supply chain are getting better used to managing the installation of these huge projects; and developers are fighting too.

There are now around 12GW of offshore projects in UK waters with planning consent but no subsidy backing. The developers of those will fight hard for subsidy support.

That 12GW figure was bolstered last week as Iberdrola subsidiary Scottish Power Renewables won planning consent for the planned 1.2GW East Anglia 3 offshore wind farm in the North Sea. East Anglia 3 is set to use Siemens Gamesa’s 7MW turbines, which are over twice as high as Big Ben, and be built 69km offshore.

And, in total, there are 15 projects that make up that almost 12GW according to figures from The Crown Estate. Here they are:

Consented UK offshore projects with no CfD or ROC



We should add that East Anglia 3 is not eligible for this month’s CfD auction, as it is due to complete after 2023 – in 2025, to be precise. But it does show that there are projects in prospect that will help to keep offshore wind in cost-cutting mode. This auction allows the sector to show it is hot on Hinkley’s heels.

This week, the UK Government is due to start the next round of its Contracts for Difference auctions. In this round, the government plans to give £290m financial support for renewables projects that complete in either 2021/22 or 2022/23.

Offshore wind is one of the government’s preferred sectors, along with wave, tidal and geothermal; and it has said that offshore wind farms taking part in this auction should achieve a strike price better than £105/MWh if they complete in 2021/22 or £100/MWh if they complete in 2022/23. We look forward to seeing who triumphs.

The auction is also a chance for offshore wind to hammer a nail in the coffin of flagship nuclear project Hinkley Point C. The project’s developer, the state-owned French utility EDF, has admitted that the scheme is already £1.5bn over budget and might not complete until 2027. This would take the total cost up to over £20bn.

On completion it is set to produce power at a price of £92.50/MWh, which is double the UK’s current wholesale electricity price. This CfD auction is a chance for offshore wind developers to show their projects can match or beat the price at Hinkley. Indeed, Ofgem has said offshore wind farms could be built in UK waters at £70/MWh. This would put pressure on the government to re-think Hinkley.

And, in our view, there is a great chance of an offshore project beating £92.50/MWh this time. We have seen how competitive auctions in Germany have helped developers push prices down to a level where there are now three schemes due to complete in the North Sea in 2025 that do not require government subsidies.

Developers have been reducing the cost of projects across Europe, so why not in the UK too? It may be too early for zero-subsidy but, for now, beating Hinkley is enough.

As comparison, Scottish Power Renewables is building its 714MW East Anglia 1 at a strike price of £119/MWh. This price was agreed in February 2015 and is only 29% more expensive than Hinkley Point C. Well, a lot has happened to reduce costs since then.

One reason we are confident of continued cost cuts in UK offshore wind is the competition. Turbine manufacturers are battling to develop machines that are bigger and more efficient; companies across the supply chain are getting better used to managing the installation of these huge projects; and developers are fighting too.

There are now around 12GW of offshore projects in UK waters with planning consent but no subsidy backing. The developers of those will fight hard for subsidy support.

That 12GW figure was bolstered last week as Iberdrola subsidiary Scottish Power Renewables won planning consent for the planned 1.2GW East Anglia 3 offshore wind farm in the North Sea. East Anglia 3 is set to use Siemens Gamesa’s 7MW turbines, which are over twice as high as Big Ben, and be built 69km offshore.

And, in total, there are 15 projects that make up that almost 12GW according to figures from The Crown Estate. Here they are:

Consented UK offshore projects with no CfD or ROC



We should add that East Anglia 3 is not eligible for this month’s CfD auction, as it is due to complete after 2023 – in 2025, to be precise. But it does show that there are projects in prospect that will help to keep offshore wind in cost-cutting mode. This auction allows the sector to show it is hot on Hinkley’s heels.

This week, the UK Government is due to start the next round of its Contracts for Difference auctions. In this round, the government plans to give £290m financial support for renewables projects that complete in either 2021/22 or 2022/23.

Offshore wind is one of the government’s preferred sectors, along with wave, tidal and geothermal; and it has said that offshore wind farms taking part in this auction should achieve a strike price better than £105/MWh if they complete in 2021/22 or £100/MWh if they complete in 2022/23. We look forward to seeing who triumphs.

The auction is also a chance for offshore wind to hammer a nail in the coffin of flagship nuclear project Hinkley Point C. The project’s developer, the state-owned French utility EDF, has admitted that the scheme is already £1.5bn over budget and might not complete until 2027. This would take the total cost up to over £20bn.

On completion it is set to produce power at a price of £92.50/MWh, which is double the UK’s current wholesale electricity price. This CfD auction is a chance for offshore wind developers to show their projects can match or beat the price at Hinkley. Indeed, Ofgem has said offshore wind farms could be built in UK waters at £70/MWh. This would put pressure on the government to re-think Hinkley.

And, in our view, there is a great chance of an offshore project beating £92.50/MWh this time. We have seen how competitive auctions in Germany have helped developers push prices down to a level where there are now three schemes due to complete in the North Sea in 2025 that do not require government subsidies.

Developers have been reducing the cost of projects across Europe, so why not in the UK too? It may be too early for zero-subsidy but, for now, beating Hinkley is enough.

As comparison, Scottish Power Renewables is building its 714MW East Anglia 1 at a strike price of £119/MWh. This price was agreed in February 2015 and is only 29% more expensive than Hinkley Point C. Well, a lot has happened to reduce costs since then.

One reason we are confident of continued cost cuts in UK offshore wind is the competition. Turbine manufacturers are battling to develop machines that are bigger and more efficient; companies across the supply chain are getting better used to managing the installation of these huge projects; and developers are fighting too.

There are now around 12GW of offshore projects in UK waters with planning consent but no subsidy backing. The developers of those will fight hard for subsidy support.

That 12GW figure was bolstered last week as Iberdrola subsidiary Scottish Power Renewables won planning consent for the planned 1.2GW East Anglia 3 offshore wind farm in the North Sea. East Anglia 3 is set to use Siemens Gamesa’s 7MW turbines, which are over twice as high as Big Ben, and be built 69km offshore.

And, in total, there are 15 projects that make up that almost 12GW according to figures from The Crown Estate. Here they are:

Consented UK offshore projects with no CfD or ROC



We should add that East Anglia 3 is not eligible for this month’s CfD auction, as it is due to complete after 2023 – in 2025, to be precise. But it does show that there are projects in prospect that will help to keep offshore wind in cost-cutting mode. This auction allows the sector to show it is hot on Hinkley’s heels.

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Not a member yet?

Become a member of the 6,500-strong A Word About Wind community today, and gain access to our premium content, exclusive lead generation and investment opportunities.