The Department for Business, Energy & Industrial Policy of the UK government announced on September 13 that it will be holding the country’s largest renewable energy auction for offshore wind power. The goal of this auction is to build up enough generation capacity to meet the electricity demand of 800 million homes.
Also, this auction will be based on the contract-for-difference (CfD) mechanism, so qualified projects will be guaranteed a minimum price for their electricity. Under a CfD, the generator receives the difference between the strike price (or the bid price) and the reference price (or the average market price). The cost of CfDs is covered by a levy imposed on all operational electricity suppliers in the UK. The cost of the levy, in turn, is passed onto end-users. The advantage of this mechanism is that generators have a higher degree of certainty with respect to revenue generation, while the effect of supporting renewable energy on the electricity bills of consumers is minimized.
The announcement is regarded as a demonstration of the UK government’s commitment to reducing greenhouses gases ahead of the 26th UN Climate Climate Conference of the Parties (COP26) that will be held in Glasgow from October 31 to November 12.
The UK government will set a budget of £200 million to support the auction. It also plans to inject another £55 million to support the development of emerging renewable technologies. Of that amount, £27 million will be reserved for the development of floating offshore wind projects.
The UK government under Prime Minister Boris Johnson has laid out a “Ten-Point Plan” for ushering in a “Green Industrial Revolution” in the country. The plan calls for £12 billion of public investments and aims to create 250,000 green jobs. Among the 10 points or areas of investments, offshore wind energy appears to be the first in priority. Energy Minister Anne-Marie Trevelyan said that the plan will contribute to the development of the next generation of renewable energy projects in the UK and help country achieve its “world-leading” climate targets.