UK Raises Renewable Auction Budget to £1.5 Billion

By Warrence Oghenevwegba 

Published on: July 31, 2024, 8:37 P.M 

Britain has significantly raised the budget for its annual renewable power auction by 50%, bringing the total to £1.5 billion ($1.92 billion), according to a government announcement made on July 31. This substantial increase is part of the new Labour government's strategy, which aims to decarbonize the electricity sector by 2030. Achieving this ambitious target will require a rapid expansion of renewable energy sources such as wind and solar power.

To facilitate this transition, the government is inviting renewable project developers to participate in the auction for Contracts for Difference (CfDs). These contracts offer a guarantee of a minimum price for the electricity produced by renewable projects. If wholesale electricity prices fall below this guaranteed price, the government covers the difference. Conversely, if prices exceed the minimum, producers repay the excess to the government. The additional £500 million—on top of the £1 billion previously allocated by the Conservative government—raises the budget for this year's auction to a record amount.

The new budget allocation includes £1.1 billion dedicated to offshore wind projects, £185 million for other established renewable technologies such as onshore wind and solar power, and £270 million for emerging technologies including floating offshore wind and tidal power. This distribution aims to support a wide range of projects and technological advancements in the renewable energy sector.

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Industry groups and renewable energy developers had called for an increased budget to meet the UK’s ambitious goal of expanding offshore wind capacity from the current 15 gigawatts to 55 gigawatts by 2030. Major companies eligible to participate in the auction include Iberdrola, Orsted, Equinor, and TotalEnergies, among others.

Energy Secretary Ed Miliband emphasized that this budget increase will position the UK as a global leader in green technologies, enhance energy independence, and contribute to long-term energy security. He highlighted the potential for significant job creation and private investment in the sector.

Despite these optimistic projections, analysts from Bernstein have raised concerns that the increased budget might still be insufficient to achieve the government's targets. They pointed to previous issues with project cancellations and the failure of the fifth auction to attract offshore wind projects due to perceived inadequacies in the offered incentives. The analysts suggest that while the budget increase is a positive step, it may not fully address the challenges and requirements needed to meet the UK's renewable energy goals.