Three offshore wind farms with a capacity totalling 3.2GW have won agreements in the government’s latest  Contracts for Difference auction. The offshore wind prices – the largest wind farms as low as £57.5/MWh –  undercut observers’ expectations. Predictions were mainly between the £60 and £75 level. They were also well below the strike price agreed by the government for power from the planned new nuclear station at Hinkley Point C.

The three offshore wind farms offer the largest tranche of new capacity:

• Triton Knoll, 860MW, due to start up from 2021/22 at a price of £74.75/MWh
• Moray, 950MW, due to start up from 2022/23 at a price of £57.50
• East Anglia, 1386MW in total, due to start up from 2022/23 at a price of £57.50.

(All in 2012 prices, in each the project will go into operation in three phases.)

Two dedicated biomass CHP projects also won contracts at £74.75/MWh. They are Grangemouth (85MW) and Rebellion (0.5MW)

Six plants using advanced thermal conversion totalling around 65MW also won contracts, five were at £74.50/MWh An energy from waste plant at Redruth achieved £40/MWh.

Responding to the announcement, the Offshore Renewable Energy Catapult noted that

• Levelised cost of energy (LCOE) has already reduced by 32% in the last five years and this trend is set to continue, with the LCoE for the successful projects estimated as £65/MWh for those commissioning in 2021/22 and £51/MWh for those commissioning in 2022/23.
• Today’s auction awards, therefore, indicate a further reduction in LCOE of 33-47% to be achieved in the space of approximately five years.

James Court, head of policy and external affairs at the Renewable Energy Association said: ”Offshore wind’s success shows what can happen with government support, and consider that this auction was for so called ‘less established’ technologies, with the more mature onshore wind and solar blocked to market. Surely now is the time for the government to commit to a low carbon industrial strategy.”

Robert Marsh, partner and co-chair of renewables practice at law firm Norton Rose Fulbright, said, “Offshore wind’s success was undoubtedly buoyed by the decreasing costs of capital in the sector and the wider downward trend of subsidy levels witnessed in other European tender processes. Given the UK regulatory environment and development processes, we were never going to see the zero-subsidy bids that emerged in Germany and in the Netherlands, though the AR2 strike prices are getting close and are certainly far more competitive than many anticipated.”

Nick Molho, executive director of the Aldersgate Group said: “Larger and more efficient turbines now mean offshore wind is a mainstream component of the UK’s energy mix and turbine blade manufacturing facilities in Hull and the Isle of Wight and servicing companies around the coast are important examples of how the industry has driven jobs and supply chain growth across the UK.

“The UK is reaping the benefits of competitive auctions and stable government policy in this area. To continue to see costs reduce, a clear pipeline of projects well into the 2020s will be required.”