Proof of the crisis facing the offshore wind sector, the British government announced on Thursday, November 16, that it would increase the guaranteed price of this electricity by two thirds, by 44 pounds sterling (50 euros) per megawatt hour. at 73 pounds. This jump follows the fiasco of the previous auction of licenses for offshore wind turbines.
In September, the British government revealed that no offer had been submitted, the proposed price of 44 pounds being considered too low to financially balance any project. The shock of inflation, which, on the one hand, increased construction costs and, on the other hand, increased the price of debt, has completely called into question the financial balance of this technology.
Since 2014, the United Kingdom has offered a system of “contract for difference” (CfD, in its English acronym), which guarantees a fixed price for renewable energies during the first fifteen years of their operation. Its level is determined during auctions, with the State previously placing a maximum ceiling. This approach has worked particularly well for offshore wind, with the country now second in the world in this technology, with 14 gigawatts of installed capacity, behind China. By 2022, 42% of UK electricity was renewable, with a third coming from offshore wind.
In almost a decade, the CfD price for offshore wind has fallen sharply. When it was first auctioned, it was around 120 pounds per megawatt hour. And in 2019, it had been divided by three, around 40 pounds, making it one of the cheapest electricity on the market.
Growing crisis
Inflation has upset this balance. In July, Sweden’s Vattenfall abandoned the construction of a wind farm off the coast of Norfolk, which was to have a capacity of 1.4 gigawatts, enough to theoretically supply 1.5 million homes. The guaranteed price of 37 pounds per megawatt hour, obtained in 2022, was no longer sufficient.
In addition to inflation, the sector is going through a serious growth crisis, Phil McNally explained in Octoberenergy specialist at College London University: “A growing number of offshore wind projects are in the pipeline for the coming years, both in the UK and overseas, and demand for parts and workers in the sector is growing. The supply chain is struggling to keep up. »
These setbacks represent a blow to the decarbonization objectives of the United Kingdom, which plans to triple the capacity of offshore wind turbines by 2030. In addition to the 66% increase in the guaranteed price on this technology, the British government is also increasing the price of other renewables: 30% for solar, at 61 pounds per megawatt hour, 32% for geothermal, at 157 pounds, and 29% for tidal technologies, at 261 pounds.
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