The British Government has confirmed an increase in the subsidies available to offshore wind developers by over 60% in an attempt to recover new projects in an industry experiencing the challenges of rising costs. The maximum price available in the next auction for contracts to develop offshore wind sites will be 66% higher than the 2023 bidding round. The Government also raised the price for floating offshore wind farms by 52%.

The price increase comes not long after developers criticised the outcome of the last auction, stating that the subsidies offered were too low. Claire Coutinho, energy secretary, explains that the global challenges had impacted offshore wind and the proposed auction terms would help deliver domestic clean energy. The government will raise the maximum price for other renewable technologies, including a 30% uplift for solar projects. The announcement was welcomed by the industry, but any subsidy increase will result in additional costs for households, who still face high energy bills.

Duncan Clark, UK head at leading wind developer Orsted, said that the announcement was a clear indicator from the government that offshore wind is a critical part of our future energy mix. Keith Anderson, CEO of Scottish Power, said the plan was a welcomed move, indicating that the government was listening to the industry. Henrik Andersen, CEO of wind manufacturer Vestas, said the move was a vital step towards strengthening investor confidence and getting projects back on the right path, which will help with reducing power prices across the country.

Renewable energy developers compete for support in annual auction rounds, which provide 15-year contracts guaranteeing additional support from billpayers if wholesale electricity prices fall below a certain level (the strike price). If the wholesale price is higher than the strike price, the government will make the difference. Long-term risks reduce the risk with upfront investment requirements to develop renewable generating capacity and have supported the UK with constructing major offshore wind projects. The last auction round, however, was deemed a failure when no bids were submitted for an offshore wind project. Developers said the strike price was too low to offset a rise in costs that have impacted the industry in the last few years.

Next year’s offshore contracts will see a strike price increase from £44 to £73 per MWh, and for floating offshore wind farms, the price will rise from £116 to £176 MWh. The UK Government wants to increase offshore wind capacity nearly fourfold to 50GW by 2030, which will require significant development of projects.

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