UK Government Announces Record Offshore Wind Budget

Amongst the new UK government’s first announcements is a record-breaking £1.5 billion budget for this year’s renewable energy auction - with much of the budget expected to be allocated to offshore wind.

The £1.5 billion budget represents a 50% increase over the previous budget allocation. £1.1 billion of this new total budget will be allocated to offshore wind.

The renewable energy auction is a policy tool used by the UK government to competitively allocate new renewable energy capacity as well as procure electricity from renewable sources. 

Describing the budget uplift, the government’s Energy Secretary, Ed Miliband MP, said: 

“Last year’s auction round was a catastrophe, with zero offshore wind secured, and delaying our move away from expensive fossil fuels to energy independence.

Instead, we are backing industry to build in Britain, with this year’s auction getting its biggest budget yet. This will restore the UK as a global leader for green technologies and deliver the infrastructure we need to boost our energy independence, protect bill payers, and become a clean energy superpower”.

Renewable energy companies will be able to bid for a share of the funding during the next auction - known as the Contracts for Difference scheme - which provides developers of renewable energy projects with initial subsidies. 

These subsidies are only paid back when the wholesale price of electricity is higher than the agreed Contract for Difference price. The last time this occurred was during the winter of 2022/23, when Contracts for Difference payments reduced the amount needed to fund government energy support schemes by around £18 per average household.

The Contracts for Difference scheme works on the basis of providing a guaranteed price for the clean energy generated by renewable energy projects. In this way, developers are provided with the level of certainty they need to commit to a final investment decision (FID) on major renewable projects. 

Under the latest auction, Allocation Round 6 (AR6), the budget will be broken down as follows:

• £1.1 billion for offshore wind - representing a £300 million uplift.
• £185 million for established technologies such as onshore wind and solar - this is an uplift of £65 million. 
• £270 million for emerging renewable technologies such as floating offshore wind and tidal - a funding uplift of £165 million.

Commenting on the budget increase, the chief executive of Energy UK, Emma Pinchbeck, said: 

“It’s a real boost for our clean energy ambitions that the upcoming auction round will now be able to deliver more renewable power. The sooner we can get new wind and solar projects up and running, the sooner we can boost our energy independence with clean, home-grown power that reduces our reliance on expensive foreign gas and helps protect us from a repeat of the price shocks that have hit customers hard in recent years.

Offshore wind is critical to hitting the government’s 2030 target, and we know that the vast majority of this capacity must be delivered through this auction round and next year’s. That remains a huge challenge, but this is certainly a big step in the right direction and another welcome demonstration of the government’s ambitions. 

As the latest figures show, renewables supplied almost half of the UK’s power last year so we’ve already seen what can be achieved - not just through generating our own clean energy but also how such projects can bring investment, growth and high-quality jobs to all parts of the country, boosting local economies and supply chains”.

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