Over the past decade, contracts for difference have supported 10 gigawatts of offshore wind deployment, including 5.5 gigawatts in last year's round, while driving prices to subsidy-free levels. The CFD program is now being replicated in emerging renewables markets.
As the next two-year cycle begins, the U.K. government is set to launch a consultation on possible changes for the CFD auction round slated for 2021. But with a net-zero-by-2050 target in place and a 40-gigawatt offshore wind target for 2030, there are calls for a more radical overhaul of the program.
“We know the next auction is in 2021, but we have no idea how much capacity will be available or what the budget for that auction is," Zoe Keeton, head of policy and regulation at the utility and developer Innogy, told GTM.
"[Innogy was] lucky and got two projects in the last round," Keeton noted. "Some of our competitors are having to sit on projects for two years until they can go into the next auction."
"If we had annual auctions, it would smooth things out for developers," she added. "It would reduce project risk and cut down on these periods of hiatus. It would also smooth things out for some of the consenting bodies and the supply chain. The delivery cycles tend to be very boom-and-bust."
"Ideally we’d like a longer-term horizon on the stepping stones to that [40-gigawatt target]," Keeton said. "Realistically we’re going to have to look at reaching 4 gigawatts...of delivery" annually.
Scotland calls for "radical review"
Within the U.K., Scotland in particular is a vocal backer of offshore wind, as it looks for a new lease on life for its North Sea oil and gas workforce. Scotland has a 2045 net-zero target versus the all-U.K. 2050 target.
In a statement emailed to GTM, Scotland’s energy minister Paul Wheelhouse said: “We believe that the U.K. government needs to commit urgently to a radical review of the CFD process, and to include changes which will bring on the capacity — including onshore and floating and fixed foundation offshore wind, as well as wave and tidal projects and the huge potential from Scotland’s islands — which will be vital to meeting both our net-zero targets.”
The Scottish government would not go as far as specifically backing annual auctions. But the CFD program, it said, “should include improvements designed to strengthen and grow the pipeline of projects and capacity upon which our energy and supply chain ambitions will depend.”
The U.K. offshore wind landscape, including supply chain companies. (Credit: RenewableUK)
RenewableUK, the industry's main trade group, is already thinking beyond the 40-gigawatt target and considering how to deliver 75 gigawatts of offshore wind by 2050, which the U.K. government’s own climate advisers have recommended. There may well be a role for annual auctions in delivering that, said Rebecca Williams, the group's head of policy and regulation.
Another issue facing the industry is the availability of seabed leases. The last U.K. leasing round was a decade ago. Scotland is now responsible for its own seabed leases, with its opening ScotWind leasing round due this year.
“The 2020 leasing rounds are a good start, but what we need is a plan to get to the [net-zero targets]," said Mandy Gloyer, U.K. offshore sites manager for Scottish Power Renewables, a subsidiary of Iberdrola.
"We need some foresight on the subsequent leasing rounds in Scotland and in England and Wales. And we need to shorten the project timeframe, including reducing the consenting process,” Gloyer said last week at Scottish Renewables’ Offshore Wind event in Glasgow.
"In demand" like never before
For now, the U.K. government’s lips are sealed about any changes in the works. It is expected to soon release a consultation, and the questions it asks in that call for responses will offer a glimpse of the likely direction of the effort.
The net-zero target is now a legal obligation rather than an ambition, and every roadmap includes dozens of gigawatts of offshore wind.
Benj Sykes, U.K. country manager for the developer Ørsted, told the Scottish Renewables event that the net-zero targets put offshore wind in an entirely new context.
“We spent two decades getting off the starting blocks to build offshore wind," Sykes said. "We are now in demand in a way that we've never been before. We are the tool that will unlock net zero."
"There is no other way we're going to do it as a nation without offshore wind. The dynamic is changing, and there is increasing pressure to deliver,” he said.
This article has been updated to correct the U.K. offshore wind target, which is 30 gigawatts by 2030, not 2040 as a previous version stated.