UK Allocates Record Clean Energy Funds and Schedules Offshore Wind Auction

The new UK government of Prime Minister Keir Starmer outlined a massive budget increase devoted to clean energy while calling offshore wind the “backbone” of the country’s strategy. They detailed increases in funding for all elements but focused the majority of the funding for offshore wind and the potential for floating offshore wind in preparation for the UK’s sixth renewable auction.

“Last year’s auction round was a catastrophe, with zero offshore wind secured, and delaying our move away from expensive fossil fuels to energy independence,” said Energy Secretary Ed Miliband. “Instead, we are backing industry to build in Britain, with this year’s auction getting its biggest budget yet.”

Historically the UK had been the global leader in offshore wind energy but was surpassed more recently by China which now has the largest installed base. The UK continues to lead Europe and the new government declared its intent to drive this development.

The plan provides the largest-ever budget for renewable energy with what the Energy Secretary calls record-breaking funding. They are adding approximately $385 million to the allocation for offshore wind bringing the total for the next auction to approximately $1.4 billion. The total budget for all forms of clean energy is being increased by more than $640 million to nearly a total of $2 billion.

While the majority of the funding is for the next auction for offshore wind projects, the government is also increasing the funding for establishing technologies such as offshore wind and solar to $238 million. A further nearly $350 million is also being provided to support emerging technologies such as floating offshore wind and tidal energy.

The UK came under pressure from developers for its use of the Contracts for Difference scheme and low thresholds. Under the system, the government ensures a strike price for electricity making up shortfalls but the operators have to pay if the price goes above the strike price. The government highlights this happened in the winter of 2022/2023 when operators had to make payments that were applied to lowering residential electric bills.

The government responded to pressure in November 2023 raising the strike price after its fifth round auction failed to attract bidders. The new government is raising the strike price slightly to approximately a maximum of $94 per MWh for offshore wind and $226 per MWh for floating wind. 

Miliband highlights that this means the budget for the sixth round is seven times higher than round five which failed. Now that the budget has been set, they announced the auction will proceed in August with successful projects to be announced in September 2024.