This year’s budget to support the next wave of renewable energy schemes has been raised to a “record” £1.5bn, the government has announced, following a failed funding process in 2023.
Energy Secretary Ed Miliband said the additional £500m for the looming renewable energy auction represented a commitment towards Labour’s goal of delivering clean, cheap, low-carbon electricity to families and businesses in the wake of the energy-driven cost of living crisis.
The fallout from Russia’s invasion of Ukraine saw wholesale gas and electricity costs surge to unprecedented levels, with the last government choosing to fill some of the resulting supply void through new oil and gas extraction licences.
Last year’s renewables auction process, an annual event which sees energy firms bid for so-called contracts for difference (CfD), failed to attract a single bid for new offshore wind power.
Energy developers said that was because the then government had failed to take into account the vast increases in costs they had been grappling since the wholesale price spike.
The Conservatives had boosted the budget for September’s auction to £1bn as a result of the criticism but the new government signalled that an even greater commitment was needed to get new green power generation back up to speed.
The so-called ‘budget’ under the CfD scheme guarantees future prices to both generators and consumers so that neither ends up footing big additional bills in the event of a major price shock.
When overall electricity prices rise above the fixed price a generator can charge, money is returned to consumers via their bill.
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When wholesale electricity prices are lower than the agreed price, the Treasury makes up the difference to the generator.
The new budget projections include £1.1bn for offshore wind.
The sum represents a £300m increase in the amount that had been planned by the Tories.
The balance is made up of £185m for established technologies such as onshore wind and solar and £270m for emerging renewables such as floating offshore wind and tidal.
The Energy & Climate Intelligence Unit estimated that the auction was likely to secure enough offshore wind to save £30-£40 per year on every household’s energy bill in the event of a future gas crisis.
But experts also cautioned that it was difficult to know how much additional capacity would be created until the conclusion of the auction process.
The announcement builds on Labour’s lifting of the de facto ban on onshore wind farms in England.
The government has also launched the publicly-owned green power company Great British Energy which, in partnership with the Crown Estate, aims to deliver a surge in new offshore wind capacity off the UK’s coasts.
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Mr Miliband 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 billpayers, and become a clean energy superpower.”
The announcements have been broadly welcomed by climate campaigners and the sector alike.
Emma Pinchbeck, chief executive of the industry body Energy UK, said of the auction budget: “The sooner we can get new wind and solar projects up and running, the sooner we can boost our energy independence with clean homegrown 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.
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“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,” she concluded.
