September 20, 2019 / 8:45 AM / a month ago

UK renewable power subsidies plunge with offshore wind awards

LONDON (Reuters) - Britain awarded 12 renewable energy projects with capacity to power 7 million homes with the lowest subsidies since auctions began, as costs to build offshore wind turbines plunged.

FILE PHOTO: General view of the Walney Extension offshore wind farm operated by Orsted off the coast of Blackpool, Britain September 5, 2018. REUTERS/Phil Noble/File Photo

Britain, the world’s largest offshore wind market accounting for 40% of global capacity, plans to generate a third of its electricity from the technology by 2030 in a bid to achieve net zero carbon emissions by 2050.

Most of the 6 gigawatts (GW) of capacity awarded in contracts announced on Friday will come from new offshore wind projects, with Innogy, SSE and Equinor among the winners.

“Seizing the opportunities of clean energy not only helps to protect our planet, but will also back businesses and boost jobs across the UK,” British Prime Minister Boris Johnson said.

The auction result was announced as thousands of students protested in Britain and around the globe to demand world leaders at a U.N. climate summit adopt urgent measures to limit the harmful effect of manmade climate change.

Under Britain’s contract for difference (CfD) scheme, qualifying projects are guaranteed a minimum price at which they can sell electricity. Renewable power generators bid for CfD contracts at auction.

The lowest price awarded was 39.65 pounds ($49.79) per megawatt hour (MWh), around 30% less than the subsidies awarded to offshore wind projects at the last auction in 2017.

Britain launched its first competitive auction in 2014 and announced results in 2015.

The offshore wind power costs have plummeted over the last few years, as developers use larger turbines with more capacity.

(Graphic: Plummeting cost of Britain's offshore wind CfD subsidies, here)

If the wholesale power price rises above the CfD strike price the generators will pay back extra cash to the government, so the projects may ultimately require no subsidy.

“There is potential that over the life of these projects we could be paying back to the treasury,” Jim Smith, managing director of SSE Renewables, said on a call with journalists.

SSE won contracts for three offshore wind projects at the Dogger Bank site off England’s northeast coast in a 50:50 venture with Norway’s Equnior. It also won contracts for its Seagreen phase 1 project off the coast of Scotland.

The projects have a combined capacity of over 4 GW.

Britain has the world’s largest fully operational offshore wind farm, Orsted’s 659 megawatt Walney Extension project.

Reporting by Susanna Twidale; Additonal reporting by Sabina Zawadzki; Editing by Jan Harvey and Edmund Blair

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