UK offshore wind auction set to flop.

[idpickering]

An upcoming auction for seven UK offshore wind projects is set to flop, according to industry sources.

The results are due to be announced on Friday, but the number of bids will be close to zero, or none at all, the sources said.

Offshore wind developers have been saying the price set by the government for the electricity they will generate is too low to make projects viable.

The government said it was committed to increasing the use of renewable energy.

Energy firm SSE and Swedish firm Vattenfall have already ruled themselves out of the bidding, saying that the government had failed to allow for sharp rises in the cost of steel and labour when setting the electricity price.

Industry sources have told the BBC that if big, experienced and well-financed firms cannot make the sums work, it is unlikely that others will be able to.

Under its wind power auctions, the government sets an electricity price which bidders compete to come in at or below.

This arrangement is called a Contract for Difference (CFD). If electricity prices in the future rise above that level, the companies pay the excess back to the Treasury, if they fall below it the Treasury pays the company the difference.

The £44 per megawatt hour price floor set for this auction fails to take account of development costs, according to industry insiders. They have been warning for some time that steel prices and wage rises had pushed their costs up by between 20% and 40% since the last auction was held at a similar price target.

Electricity generators were also hit with a windfall tax on profits from older projects that pre-dated the Contract for Difference regime. SSE warned at the time that the tax would cause it to review future investment plans.

https://www.bbc.co.uk/news/business-66740920

As a holder of UKW and TRIG, this item is of some concern to me to be honest. I thought going green was the way forward....

Ian.

[Urbandreamer]

As a holder of UKW and TRIG, this item is of some concern to me to be honest. I thought going green was the way forward....

Ian.

As a fellow holder of TRIG and someone who believed the green aspects of government statements when I invested, I'm not surprised. Indeed I would be concerned were TRIG to involve themselves.

Why?

Well surely you remember the "reward" for building all the offshore wind farms when gas from Russia was cut. Slap a "windfall" tax on production.

Let the UK government build future wind farms itself. TRIG can invest in other parts of the EU.

Ps, I suspect that the UK governments current change in stance re onshore wind farms is entirely due to a lack of willingness in the private sector to finance off shore wind farms since the introduction of that tax.

[BullDog]

Every cloud etc.....

Perhaps the failure to secure more off shore wind capacity makes the future of those already installed more valuable?

But it's not really a surprise this. Some of the projects that previously won capacity auctions aren't being built anyway. Seemingly because the apparently increased cost of construction since the auction now makes them uneconomic. I suspect this is a case of seeing who blinks first, the energy companies or the government. I suspect it'll be the government.

[Dod101]

Every cloud etc.....

Perhaps the failure to secure more off shore wind capacity makes the future of those already installed more valuable?

But it's not really a surprise this. Some of the projects that previously won capacity auctions aren't being built anyway. Seemingly because the apparently increased cost of construction since the auction now makes them uneconomic. I suspect this is a case of seeing who blinks first, the energy companies or the government. I suspect it'll be the government.

I have argued the same on the Greencoat thread, that if this auction flops, it surely makes existing windfarms more valuable if anything. The £44 being offered is not market forces at work; it is the price offered by government and of course contractor/developers are perfectly entitled not to take part in an auction and leave the government with a problem. That will surely only be solved by increasing the price on offer or introducing some inflation protection on the constructions costs.

Dod

[scotview]

I suspect this is a case of seeing who blinks first, the energy companies or the government. I suspect it'll be the government.

The government also has the option of changing it's net zero strategy.

[BullDog]

I suspect this is a case of seeing who blinks first, the energy companies or the government. I suspect it'll be the government.

The government also has the option of changing it's net zero strategy.

Needs legislation to do that though, it's written in UK law.

With the idiot Milliband probably taking over as energy and net zero minister, I expect electricity black outs to be more likely than any sensible energy policy.

[Urbandreamer]

With the idiot Milliband probably taking over as energy and net zero minister, I expect electricity black outs to be more likely than any sensible energy policy.

Or even if the current lot remain. Mr Milliband, whatever his faults, didn't set the current regime in place. That regime is why nobody wants to finance new off shore wind or even nuclear.

https://www.energylivenews.com/2023/01/ ... dfall-tax/

Blackout fears mount as EDF has warned it may have to shut down two nuclear power plants as a result of the implementation of the new windfall tax on low carbon electricity producers.

The simple fact is that the current government has provided great reasons to invest in green energy projects....somewhere else!

[BullDog]

With the idiot Milliband probably taking over as energy and net zero minister, I expect electricity black outs to be more likely than any sensible energy policy.

Or even if the current lot remain. Mr Milliband, whatever his faults, didn't set the current regime in place. That regime is why nobody wants to finance new off shore wind or even nuclear.

https://www.energylivenews.com/2023/01/ ... dfall-tax/

Blackout fears mount as EDF has warned it may have to shut down two nuclear power plants as a result of the implementation of the new windfall tax on low carbon electricity producers.

The simple fact is that the current government has provided great reasons to invest in green energy projects....somewhere else!

Thanks for reminding me. Milliband is far, far from being the only idiot in parliament. Heaven knows, the current government is stuffed full of self serving idiots.

[Hallucigenia]

Actual numbers are here :
https://assets.publishing.service.gov.u ... esults.pdf

Strike prices are 2012 prices, so you have to add a fair bit of inflation since then.

1928 MW of "big" solar @ £47/MWh
1481MW of onshore wind and 224MW of Remote Island Wind on Shetland both @ £52.29/MWh
53MW of tidal stream @ £198/MWh across 11 projects from 6 companies
12MW of geothermal @ £119/MWh across three projects from two companies

Typical government on offshore wind -they were told their target price was unrealistic, due to higher costs, but they wouldn't listen. But that acreage hasn't disappeared, it'll just get auctioned again and will get developed at a higher price.

Good to see a few more tidal companies entering the fray, but the economics still are nothing like some of the optimistic forecasts we've seen in the past. Big solar is really coming of age though, and good to see some geothermal sneaking in there.

[88V8]

Typical government on offshore wind -they were told their target price was unrealistic, due to higher costs, but they wouldn't listen.

One wonders if the sudden enthusiasm for onshore wind is intended as a distraction from the way they've cocked up the offshore policy.

V8

[Hallucigenia]

One wonders if the sudden enthusiasm for onshore wind is intended as a distraction from the way they've cocked up the offshore policy.

V8

Nah - the onshore thing is kinda deeper, it has its roots in a "get the government out of the way" way of thinking but being cynical one might also observe that the big beneficiaries of onshore wind are large landowners, very much a core constituency of old-school Toryism. They could have tweaked the target price once it became clear how badly the offshore auction was going, but that's just a stubbornness in the face of evidence that again is not unfamiliar to the current government.

[DrFfybes]

Heaven knows, the current government is stuffed full of self serving idiots.

Compared to all the previous ones, which weren't?

The Govt, or the people making the decisions, seem incapable of admitting an error. MrsF deals a lot with Central Govt people, they change roles like they change their socks, no continuity, and each person wants something slightly different to their predecessor.

As said, if nobody is bidding, it is because they can't make money doing it, in which case the contracts need to bbe revised to make them appealing.

However what usually happens is the blinkered people in charge will ignore this glaring issue until it is too late, quietly sweep the auction under the carpet, then start again.

Paul

[BullDog]

Heaven knows, the current government is stuffed full of self serving idiots.

Compared to all the previous ones, which weren't?

The Govt, or the people making the decisions, seem incapable of admitting an error. MrsF deals a lot with Central Govt people, they change roles like they change their socks, no continuity, and each person wants something slightly different to their predecessor.

As said, if nobody is bidding, it is because they can't make money doing it, in which case the contracts need to bbe revised to make them appealing.

However what usually happens is the blinkered people in charge will ignore this glaring issue until it is too late, quietly sweep the auction under the carpet, then start again.

Paul

Yes. Especially now that the incumbents appear to have given up actually doing anything. I suppose it's largely because they expect to be booted out and the most productive thing they can think of doing now is making it as hard as possible for the next lot to do anything either. And so it goes.

As an aside, but equally important I think is those off shore wind farms that have contracts and aren't being built. I remain unconvinced that SSE's Dogger Bank Phases 2 & 3 will actually happen.

Would not surprise me in the least if Dogger Bank Phase 2 & 3 get canned.

[Urbandreamer]

One wonders if the sudden enthusiasm for onshore wind is intended as a distraction from the way they've cocked up the offshore policy.

V8

Nah - the onshore thing is kinda deeper, it has its roots in a "get the government out of the way" way of thinking but being cynical one might also observe that the big beneficiaries of onshore wind are large landowners, very much a core constituency of old-school Toryism. They could have tweaked the target price once it became clear how badly the offshore auction was going, but that's just a stubbornness in the face of evidence that again is not unfamiliar to the current government.

While you may have a point, possibly you might consider the land owner who benefits from off shore wind. As I understand it they were around long before the Tory party was founded and certainly before it ceased to exist and became the conservative party.
https://www.thecrownestate.co.uk/en-gb/ ... -finances/

£442.6 million generated for the nation’s finances, £129.9 million higher than last year. This increase primarily reflects option fee income from the signing of Agreements for Lease for six offshore wind farms through the Round 4 leasing programme and revenue resilience in its other lines of business.

More here:
https://www.thecrownestate.co.uk/en-gb/ ... r-history/

[monabri]

Good, they refuse to play the "Carrilion Game"! ( an eagerness to bid for no/low margin work).

[jaizan]

What we need is a government that encourages investment in energy that is fit for purpose.

Windpower output at the time of typing this = 4.5 GW
Wind capacity = 30 GW

We happen to have a cold spell right now & as is often the case, the wind speeds are low. So output is a mere 15% of capacity, whether we like it or not.

When we have gone "zero carbon" and everyone is using heat pumps to heat their houses, the electric demand will be abnormally high. Yet the wind turbines will not be generating electric to power those heat pumps. Or to charge their electric cars.

Wind power is unfit for purpose. We can only patch over this deficiency by burning gas. Gas is expensive and it's not zero carbon, so that's a temporary solution.
Batteries are not durable and simply don't have the capacity for a week of cold weather with low wind.

So there is no zero carbon solution that involves mainly relying on wind power.

[88V8]

What we need is a government that encourages investment in energy that is fit for purpose.
Batteries are not durable and simply don't have the capacity for a week of cold weather with low wind.....
...there is no zero carbon solution that involves mainly relying on wind power.

Very true.
It would only work with massive wind overcapacity.
Same goes for solar of course, especially in winter.

Batteries... indeed we should be investing in grid-scale batteries but that seems not to be on the govt's radar. And if all new builds were obliged to have their own batteries, agree it wouldn't tide us over a week but it would help.

I had hoped that tidal might be a good area to invest, but my, ahh, investment... in Atlantis has pretty much sunk without trace.

V8

[Urbandreamer]

When we have gone "zero carbon" and everyone is using heat pumps to heat their houses,....

STRAW MAN warning repeat, straw man warning!

Nobody, and I repeat NOBODY, has claimed a position of zero carbon.

The phrase is NET zero for a reason. The claimed target is to add no more carbon to the atmosphere than is removed.

It's a deliberately simple concept. In practice reducing carbon has less effect than reducing the amount of methane added for the same volume, BUT it's thought to be easier to understand.

You know, like the concept of carbon capture, might allow us to produce more CO2? Ok, I doubt that will prove effective, but the option is inherent in the target.

Sure net zero is a BIG ask. Impossible without addressing transport and heating, but it's NOT what you claim at all.
The simple choice of being able to use wind energy for any significant part of transport, i.e trains. makes is huge difference. Cars as well of course. Then heating homes.

Talking straw man, who EVER claimed that we should rely upon a single means of supplying electricity? Well, I meant other than those who point out the stupidity of doing so with what they object to being part of the mix.

For some reason I suspect that most on this board might just question the idea of only using gas to supply our electricity.

However, ignoring the arguments, the current government seems to have decided that it doesn't want to continue to address climate change. They have abandoned policies they set in place intended to do so.

[scotview]

However, ignoring the arguments, the current government seems to have decided that it doesn't want to continue to address climate change.

Then why has it bumped up contractual rates to make offshore wind attractive again, after the last disastrous auction. The only reason for going down the wind power route is for climate change, otherwise we could have 100% dispatchable energy based on a single fleet of HC driven generating plant and domestic gas boilers.

The government (red or blue) is 100% hell bent on the UK redressing climate change (whether real or imaginary) as far as I can see. I also bet there is a lot of MP vested interests in "green" energy.

Sorry to be so negative but that's how I see it.

[servodude]

The only reason for going down the wind power route is for climate change

It's an unusual "only" that ignores the cost

Have you compared the LCOE with other forms of generation?
It's this that is driving the transition in most of the planet - not its green credentials!

-sd