The price of offshore wind energy has fallen to a new record low as the Government announced 11 gigawatts of winning bids for several renewable technologies.
The government said it has secured a record amount of renewable energy in its flagship auction system.
Companies have been given the right to build 11 gigawatts (11 GW) of onshore and offshore wind, solar and floating offshore wind and tidal energy.
That’s enough to power about 12 million households, officials said.
The so-called contracts for difference (CfD) auction sets a guaranteed price paid to each project for every megawatt hour (MWh) of energy it produces. This is called the strike price.
If the price of electricity on the open market is lower, subsidies will be introduced to supplement payments to companies.
But if the price is higher – as it is now – companies will have to pay back the difference.
The more cheap, clean power we generate within our own borders, the better protected we will be from volatile gas prices that drive bills up
On Thursday, the cheapest offshore wind farms recorded a strike price of £37.35. The previous record low was £39.65 – set in 2019.
In comparison, the strike price for the Hinkley Point C nuclear power plant is £106.12.
The UK still gets a significant portion of its electricity from gas. With gas prices soaring over the past year, electricity prices have traded above £150 per MWh, meaning many wind farms are giving cash back to customers.
The price of renewable energy has fallen sharply in recent years.
The first CfD auction took place in 2015 and since then the price of offshore wind in the contracts has fallen by almost 70%.
Onshore wind is also 45% cheaper than in the 2015 round – the last time onshore wind and solar were eligible for inclusion.
For the first time, the auction included tidal current technology, of which 41 MW will be built, and floating offshore wind turbines, which will provide 32 MW of capacity.
These more innovative technologies will be much more expensive, with tidal wind contracts at £178.54 per MWh and floating offshore wind at £87.30.
Company and Energy Secretary Kwasi Kwarteng said: “Amazing gas prices are hitting consumers across Europe.
“The more cheap, clean power we generate within our own borders, the better protected we’ll be from volatile gas prices that drive bills up.”
Most of the 11 GW of new capacity will be built as wind farms off the coast of Great Britain. The 7 GW of new offshore wind will increase the country’s capacity by 35%.
Today is a big step forward in our quest for a low-cost, low-carbon energy system
The government aims to achieve 50 GW of offshore wind energy by the end of the decade, furthering its goal of ensuring 95% of electricity comes from low-carbon sources.
With 1.4 GW, a new wind farm is being built by the Swedish Vattenfall off the coast of East Anglia is the second largest single project in the auction round.
Danielle Lane, the company’s UK Country Manager, said: “Today is a major step forward in our quest for a low-cost, low-carbon energy system.
“This auction positions the UK firmly as a renewable energy superpower, accelerating the achievement of our climate goals and reducing our reliance on expensive, imported gas.”
Denmark’s Orsted will build the largest project in the auction – a massive 2.9 GW site, the largest in the world – off the east coast of England.
RenewableUK’s deputy chief executive, Melanie Onn, said: “The cost of living crisis and the war in Ukraine have pushed affordability and energy security to the top of everyone’s agenda, with bill payers desperate to ease the price hikes for fossil fuels.
“Today’s record-breaking auction results show that there is a way to replace unaffordable gas with cheap clean power generated by a wide range of renewable technologies, led by wind, both offshore and onshore.
“Thanks to the rapid build times of renewables, bill payers will begin to feel the benefits of today’s auction next year.”