UK secures record supply of offshore wind but price rises

The UK has awarded contracts to build a record amount of offshore wind projects as part of its efforts to grow the country’s clean electricity sources.

The projects span England, Scotland and Wales, including part of what could become the world’s largest offshore wind farm, off the coast of Scotland in the North Sea.

But some analysts warn that despite the record haul of offshore wind, the government will still struggle to meet its 2030 “clean power” target.

The government argues that wind projects are cheaper than new gas power stations and will “bring down bills for good”, but the Conservatives have accused its climate targets of raising energy costs.

The biggest successful project is the first phase of Berwick Bank in the North Sea, which is the largest planned offshore wind farm worldwide.

Other projects to be awarded contracts include the Dogger Bank South wind farm off the coast of Yorkshire and the Norfolk Vanguard project off the coast of East Anglia – while Awel Y Mor was the first successful Welsh project in more than a decade.

Chris Stark, who is overseeing the government’s clean power push, described the results as “a great outcome for the country” and said that the mix of English, Scottish and Welsh projects would help to get electricity to people’s homes more easily.

The government wants at least 95% of Great Britain’s electricity to come from “clean” sources by 2030, partly to reduce emissions of planet-warming gases from fossil fuels. These clean sources include renewables – such as solar and wind – and nuclear energy.

Offshore wind is widely seen as the backbone of Great Britain’s future clean electricity system, with plentiful wind resources off the country’s coastlines.

The government wants at least 43 gigawatts (GW) of offshore wind by 2030 to help meet its clean power target.

That is a big step-up from its current offshore wind capacity, which stands at 16.6GW, with a further 11.7GW under construction, according to the government.

Building offshore wind and connecting it to the grid takes time – and many analysts have viewed this auction as crucial to get enough wind to meet its target.

The 8.4GW secured at this latest auction just about keeps the offshore wind target in reach, several analysts have told the BBC. But all those projects will still need connecting to the grid to generate electricity.

“Getting that amount of capacity online by 2030 [will be] extremely challenging,” said Nick Civetta, project leader at the Aurora Energy Research think tank.

Like many sectors, the offshore wind industry has been hit by rising costs over the past few years.

This is linked to factors like global supply chain pressures, increased steel costs and high interest rates, partly the result of the Russia-Ukraine war.

Last year, energy company Orsted decided to “discontinue” one of the country’s biggest wind projects, Hornsea 4, despite it previously being awarded a contract.

In this latest auction, traditional offshore wind projects – those fixed to the seabed – have been awarded an average fixed price of nearly £91 per megawatt-hour of electricity generated, in 2024 prices.

While that is down considerably from the first auction in 2015, it is up from the £82/MWh awarded at the last auction for new-build projects in 2024, also in 2024 prices.

The government acknowledges the rising cost of offshore wind, but argues that it should be compared with the cost of new gas power plants.

Its figures suggest that building and fuelling new gas plants would cost £147/MWh, including a carbon price – a charge for emissions.

Energy Secretary Ed Miliband said: “With these results, Britain is taking back control of our energy sovereignty. This is a historic win for those who want Britain to stand on our own two feet, controlling our own energy rather than depending on markets controlled by petrostates and dictators.”

The Conservatives have been asked for comment. Posting on X, shadow energy secretary Claire Coutinho said that wind was “getting significantly more expensive” and that the government is “locking us into” high prices. She also suggested offshore wind brought extra costs, such as upgrading the grid.

Reform has also repeatedly attacked the cost of net zero, but the Lib Dems and Greens both support the expansion of renewables to tackle the threat of climate change and boost green jobs.

SNP and Plaid Cymru also support the growth of offshore wind, but argue Scotland and Wales should have control of their energy resources.

The results of the auction have been broadly welcomed by the energy industry and climate groups, although RSPB Scotland raised concerns about the possible impacts of the Berwick Bank farm on seabird populations.

The prices awarded by the government are fixed – in this auction, for 20 years. That certainty is designed to reassure developers that they will get a return on their upfront investment.

The projects can end up raising or lowering household bills, partly depending on how they compare to the price of electricity on the wholesale market. Their final impact on bills depends on a range of factors, including our future demand for electricity – which is expected to increase – and the price of gas.

Previous renewables projects funded by this scheme have often been given an effective subsidy. But analysts note they have brought some savings elsewhere, by displacing some of the most expensive gas power stations and reducing prices on the wholesale electricity market.

Today, wholesale market prices are usually driven by gas, but growing clean energy sources are expected to set the wholesale price more often in future.

The government has also pledged to bring energy bills down by up to £300 by 2030. In the Budget, it announced changes which could cut bills by about £150, by moving some costs for older renewables onto general taxation and scrapping an energy efficiency scheme.

But at the same time, plans for grid upgrades – announced last year by the energy regulator Ofgem – will start adding to bills too.