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Three offshore wind farms awarded contracts by government

Words: Laura Edgar
Offshore wind turbines / iStock_000033111088

The government has announced that three offshore wind farm projects, including the Hornsea Project 2 scheme, have been successful in the latest competitive auction for renewable technology.

The three projects, along with eight other renewable energy projects, put in the lowest bids for Contracts for Difference (CfDs).

In total, the 11 projects will generate over 3 gigawatts (GW) of electricity, enough to power 3.6 million homes. Of that, the wind farms have the capacity to power 3.3 million homes.

The winning offshore wind farms are:

  • DONG Energy’s Hornsea 2, off the coast of Yorkshire;
  • Innogy and Statkraft’s Triton Knoll, off the coast of Lincolnshire; and
  • EDPR’s Moray, off the north-east coast of Scotland.

The government said the competitive approach continues to drive cost reductions in the renewable energy industry, with the cost of new offshore wind projects starting to generate electricity from 2022/23 are now 50 per cent lower that the first auction held in 2015.

The other projects – Advanced Conversion Technologies and Dedicated Biomass with Combined Heat and Power – also made “significant savings”.

RenewableUK, the trade body for wind, wave and tidal energy industries, said these offshore wind prices are cheaper than the cost of the 35-year contracts for nuclear power and the levelised cost of gas, according to figures from the Department of Business, Energy and Industrial Strategy.

Hornsea 2 and Moray will begin generating in 2022/23 at £57.50 per megawatt hour (MWh). Triton Knoll will being generating in 2021/22 at £74.75 per MWh. Prices are guaranteed for 15 years of an expected project life of 25 years.

Richard Harrington, minister for energy and industry, said: “The offshore wind sector alone will invest £17.5 billion in the UK up to 2021 and thousands of new jobs in British businesses will be created by the projects announced today. This government will continue to seize these opportunities as the world moves towards a low carbon future, and will set out ambitious proposals in the upcoming Clean Growth Plan.”

Hugh McNeal, chief executive at RenewableUK, said: “We knew today’s results would be impressive, but these are astounding. Record-breaking cost reductions like the ones achieved by offshore wind are unprecedented for large energy infrastructure. Offshore wind developers have focused relentlessly on innovation, and the sector is investing £17.5 billion into the UK over the next four years whilst saving our consumers money.

"[The] results are further proof that innovation in the offshore wind industry will bring economic growth for the UK on an industrial scale. The UK needs to establish new trading opportunities as we leave the European Union, and the UK’s offshore wind sector is a world leader in a global renewable energy market currently worth $290 billion a year.”

McNeal thinks the renewable industry can go further in providing cheaper energy if the government continue to hold fiercely competitive auctions for future projects.

“It’s important that innovative renewable technologies, including wave energy and tidal energy projects also have a route to market, so different mechanisms are needed to ensure these cutting-edge technologies can develop. Tidal energy projects are already showing cost reductions and with the right encouragement can undergo the same sort of journey as offshore wind. Onshore wind is the cheapest from of new power, so it deserves an opportunity to compete too”.

Matthew Wright, managing director for DONG Energy UK, said: "This is a breakthrough moment for offshore wind in the UK and a massive step forward for the industry. Not only will Hornsea Project Two provide low cost, clean energy to the UK, it will also deliver high quality jobs and another huge boost to the UK supply chain.

"Successive governments deserve great credit for providing the certainty for continued investment in offshore wind, enabling it to become the thriving renewable industry it is today. Costs are falling rapidly, long-term and highly-skilled jobs are being created across the north of England and the UK supply chain is going from strength to strength. We're now really seeing the benefits of this commitment to offshore wind and there is still so much more to come. Indeed, it has the potential to play a key part in the realisation of the UK's industrial strategy."

João Manso Neto, CEO of EDPR said: “EDPR’s sustained commitment to the UK offshore wind market through Electricity Market Reform and the transition to CfD auctions has enabled dramatic cost reduction from £150/MWh in 2014 to £57.50/MWh today.

“This auction has demonstrated the real progress in cost reduction and our result shows how affordable offshore wind can be compared to other technologies, including new thermal generation. The UK needs more low carbon generating infrastructure to maintain security of supply against an increasingly uncertain future. EDPR has demonstrated what can be done at this site. It is in the UK’s interests to enable us to continue this achievement at other sites”

Paul Cowling, innogy Director of Offshore Wind, said: “Triton Knoll will provide low-cost, clean sustainable energy for consumers and UK businesses, that is cheaper than nuclear and competitive with new build gas generation. Cost reduction is at the heart of offshore wind development and is accelerating faster than ever. The importance of offshore wind in the UK’s energy mix is now beyond doubt. Wind energy should be at the very core of UK Government’s energy policy and our long-term energy security.

“With these price reductions achieved, we now look forward to the government announcing the dates for future auctions, to continue to drive further cost reductions both in offshore wind and across other technologies.”

Read more:

Contracts for Difference Second Allocation Round Results (pdf)

Clark approves ‘world’s largest’ offshore wind farm

Image credit | iStock