UK renewables auctions increased to once a year in latest green energy push

The British government has unveiled annual renewable energy auctions to accelerate the development of clean energy sources such as offshore wind and solar farms.

Auctions in the “contracts of difference” (CfD) initiative will increase from once every two years to annually from March 2023, officials said.

Business Secretary Kwasi Kwarteng said the decision to increase the number of auctions would reduce the UK’s reliance on expensive gas imports, with the move coming at a time when consumers are grappling with higher energy bills amid a surge in wholesale gas prices.

“We are hitting the accelerator on domestic electricity production to boost energy security, attract private investment and create jobs in our industrial heartlands,” Mr Kwarteng said.

“The more clean, cheap and secure power we generate at home, the less exposed we will be to expensive gas prices set by international markets.”

Natural gas and electricity prices around the world have rocketed since the middle of last year amid supply disruption and a post-pandemic surge in demand, which has caused energy bills to soar for millions of Britons.

Three of Britain’s biggest energy suppliers now back plans to introduce energy “surge pricing”, in which millions of households are charged more for using energy during peak periods and less in quieter ones.

The move comes days after Octopus said it would pay customers to use less electricity during peak demand periods under a new trial with National Grid to ensure a steady supply of power as the UK transitions to net zero.

Octopus’s 1.4 million smart-meter customers will receive discounts on their bills if they reduce power consumption below usual levels during two-hour windows at key periods this winter.

Companies will bid in the government’s renewables auctions for funding to give them a guaranteed price for the power they will produce from low-carbon technology, with the lowest prices winning the contracts which then enable the project to be developed.

It is the main route for the Government to support the renewables sector, and has already helped drive down the price of offshore wind significantly.

Increasing the frequency of auctions should boost the development of more renewable power, including onshore wind and solar, which were excluded by the Government from the programme for years, as well as offshore wind.

The auctions will help to propel the government’s efforts to put the UK on the path to cutting greenhouse gas emissions to zero overall by 2050, which is needed to curb climate change.

Despite Britain working to drive down demand for fossil fuels as it strives for a net-zero future, six new oil and gas fields in the North Sea are expected to receive the go-ahead from the government this year.

Chancellor of the Exchequer Rishi Sunak wants to fast-track licences for the construction of the six energy areas, a move driven by Treasury fears for the economic hit from switching to greener forms of energy too quickly.

British consumers are already struggling with higher energy bills, with prices expected to rise more than 50 per cent in April, when the price cap from regulator Ofgem – the maximum suppliers are allowed to charge in a year – will rise by £693 ($940).

The government’s renewables contracts are paid for through bills, but because they stipulate a specific price for electricity from clean schemes, if the wholesale price of power goes above that level the producer pays back money to the consumer.

Offshore wind farms paid back nearly £117 million for the final three months of last year, while onshore producers returned more than £40m, as electricity prices soared.

“Moving to annual CfD auctions is a major step forward which will significantly accelerate the speed of our nation’s transition to net zero,” said Dan McGrail, chief executive of RenewableUK.

“It’s good news for consumers too, as it means the UK will be reducing its vulnerability to volatile international gas prices and increasing the volumes of low-cost renewable energy in our energy system.”

A draft budget of £285m has been set for the fourth contracts for difference round, which is under way, with the lion’s share planned for offshore wind.

“There’s a huge appetite among renewable energy developers to invest in building more projects, which will help to grow the UK supply chain at a faster rate,” Mr McGrail said.