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Landmark CfD auction secures two offshore wind contracts at 37% less than the cost of Hinkley

Yesterday BEIS (Department for Business Energy and Industrial Strategy) confirmed the latest Contract for Difference auctions in which two major wind projects from Dong Energy and EDPR with Engie secured contracts. It said that a record amount of renewable capacity is set to generate over 3GW of electricity, enough to power 3.6 million homes.

 

Dong Energy will build 1.386MW of its Hornsea Project that will be the largest offshore site in the world upon completion in 2022/23. The 15 year contract has been agreed at £57.50 / MWh; a rate that is significantly less than Hinkley Point C, which was agreed at £92.50 / MWh.

 

EDPR has secured a joint venture contract with Engie to build 950MW of the Moray Offshore Wind Farm East Project in 2022/23, while Innogy has received a rate of £74.75 / MWh for delivery of an 860MW site one year earlier in 2021/22. The contract rates have almost halved since 2015.

 

Speaking to Wind Power Offshore, Chief executive of RenewableUK Hugh McNeal said the results were “unprecedented”.

 

“Today’s results mean that both onshore and offshore wind are cheaper than gas and nuclear. But this young, ambitious industry can go even further. The government can help us by continuing to hold fiercely competitive auctions for future projects, as it has promised, and by putting offshore wind at the heart of its upcoming Industrial Strategy.”

 

‘We knew today’s results would be impressive, but these are astounding.’

 

Caroline Lucas, the Green party’s co-leader, said: “This massive price drop for offshore wind is a huge boost for the renewables industry and should be the nail in the coffin for new nuclear.”

 

In November of last year BEIS estimated the levelised cost of offshore wind power to be £92 / MWh by 2020 so yesterday’s results have proven the cost of the technology has fallen far more rapidly than previously expected.

 

The 2016 BEIS report also estimated large-scale solar (+5MW) projects to cost just £67 / MWh in 2020 and £63 / MWh for onshore wind. At present, solar PV and onshore wind are excluded from bidding in Contracts for Difference but after yesterday’s results the government is already facing pressure to reconsider this decision.

 

Scottish Renewables’ Deputy Chief Executive, Jenny Hogan, said “onshore wind and solar are currently excluded from competing in Contracts for Difference auctions. The government has the tools to drive down costs even further and these technologies can and should be allowed to play their role in delivering the government’s ownIndustrial Strategy.”

 

“We hope to see all renewable technologies getting the chance to bid in future auction rounds and to demonstrate just how cheap they can be.”

 

 

GMI Energy

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