The UK government will increase the budget for the next Allocation Round 6 (AR6) renewable energy auction to £1.5 billion in a boost for offshore wind developers.
The new budget represents a £500 million increase to the funding set by the previous Conservative government.
The overall AR6 budget is now seven times higher than last year’s failed AR5 auction, which received no offshore wind bids.
The £1.5 billion is the highest amount ever committed to UK renewable energy projects under the the Contracts for Difference (CfD) scheme.
‘Biggest budget yet’ for offshore wind
Labour pledged to quadruple offshore wind capacity during the recent election campaign and many observers said the AR6 budget needed to increase to keep 2030 targets in reach.
The total funding for offshore wind will now be set at £1.1 billion, representing an increase of £300 million from the previous AR6 budget announced in March.
© Supplied by Neart na GaoitheLabour will also more than double the funding set aside for emerging technologies like floating wind and tidal energy.
Renewable energy developers had labelled the funding allocated by the previous Conservative government as a “missed opportunity“.
Energy secretary Ed Miliband said the funding increase will “restore the UK as a global leader” in clean energy and deliver the infrastructure needed to lower electricity bills and boost energy independence.
“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,” Miliband said.
“Instead, we are backing industry to build in Britain, with this year’s auction getting its biggest budget yet.”
In a statement, the Department for Energy Security and Net Zero (DESNZ) said funding boost will drive clean energy investment and support high quality jobs in industrial heartlands and coastal communities.
While wind developers will welcome the AR6 budget increase, the oil and gas sector is warning Labour’s windfall tax proposals will impact energy transition investment.
North Sea firms and opposition parties say the tax changes will put jobs at risk and lead to higher costs for renewables projects as supply chain firms look to invest elsewhere.
Allocation Round 6
In addition to the budget increase for offshore wind, Labour will also allocate more funding to other renewable energy sectors in AR6.
Established technologies like onshore wind and solar farms will receive £185 million, an increase of £65 million.
Meanwhile, emerging sectors like floating offshore wind and tidal energy will receive £270 million, an increase of £165 million.
Ringfenced funding for tidal projects will be increased to £15 million, up from £10 million.
© Supplied by Ross Creative CommunThe AR6 funding boost comes shortly after the UK government moved to establish its publicly-owned GB Energy last week, appointing Juergen Maier as chairman.
Labour said GB Energy will work alongside The Crown Estate to progress offshore wind deployment.
GB Energy will have an initial budget of £8.3 billion to work with, which the government estimates will lead to between 20 and 30 GW of new offshore wind developments reaching seabed lease stage by 2030.
In addition, Labour also plans to give the Crown Estate more borrowing bowers in a bid to unlock £60 billion in private investment.
The government will also make reforms to the planning system, making it easier to build onshore wind, solar and battery gigafactory developments.
Renewable energy sector welcomes funding boost
The UK offshore wind sector reacted positively to the funding increase for AR6.
ScottishPower chief executive officer Keith Anderson said the auction “needed a reset” after the failure of AR5.
“We welcome the increased budget, which is an important investment signal to the industry to make Britain a clean energy superpower, secure more low-cost offshore wind and spur economic growth,” Anderson said.
© Supplied by SSE“This will unlock billions in private investment, support thousands of jobs, strengthen our energy security and produce the green and affordable power needed for decades to come.”
Energy UK chief executive Emma Pinchbeck said the AR6 funding increase is a “big step in the right direction” for offshore wind and solar.
“Offshore wind is critical to hitting the government’s 2030 target and we know that the vast majority of this capacity must be delivered through this auction round and next year’s,” Pinchbeck said.
Funding boost to unlock investment
RenewableUK chief executive Dan McGrail also welcomed the announcement.
“This builds on a series of positive announcements from [the] government which are increasing investor confidence in the UK, including ending the ban on onshore wind in England and approving new large-scale solar farms,” McGrail said.
“This auction will not unlock investment in all shovel-ready projects, so the government will need to ensure that the next auction rounds focus on project delivery to ensure we achieve the Prime Minister’s clean power mission and increase the confidence of investors in the UK’s supply chain.”
Marine Energy Council chair Sue Barr said the UK government demonstrated “international leadership” in increasing the tidal stream ringfence.
“This is an important step forward in realising the potential of this entirely predictable renewable energy resource,” Barr said.
© Supplied by Orbital Marine Power“The UK can lead the world in harnessing the power of its tides, and in exporting tidal stream technology and its expertise around the world.
“The government’s ambition is to make Britain a clean energy superpower. We believe that tidal stream will be a key technology in realising that mission.”
The Marine Energy Council said the AR6 ringfence is expected to contract an additional 25 MW of tidal stream capacity to the UK’s deployment pipeline.
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