The UK's business and energy department (BEIS) is hoping to secure investment in around 12GW of green energy projects, expecting to auction off £285 million in funding per year in its latest round of bidding, officials revealed on Monday.
The UK is set to host its largest renewable auction. Credit: Jevanto Productions / Shutterstock
Described as the "next generation" of British green energy projects, the fourth wave of the Contracts for Difference (CfD) scheme seeks to provide more green energy to the nation's grid than its previous pledges combined as part of plans to rapidly switch away from fossil fuels.
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£200 million will be set aside solely for offshore wind projects, which currently occupy much of the UK's renewable capacity owing to ease of access to the North Sea, which is relatively shallow and often sees high wind speeds. The remaining £85 million will be assigned to what the government refers to as "emerging technologies".
Of these technologies, £24 million has been allocated for floating offshore wind projects, which has seen relatively little development in the UK, while an initial £20 million has been granted to look into tidal stream projects. The remaining funding will be auctioned off to solar, onshore wind and geothermal projects, among others, for the first time since the initial funding wave in 2015.
Previous waves reportedly led to the price of offshore wind generation dropping by around 65% between the second and third waves of funding in 2015 and 2019, respectively.
"Our biggest ever renewables auction opening today will solidify the UK’s role as a world leader in renewable electricity, while backing new, future-proof industries across the country to create new jobs," business secretary Kwasi Kwarteng said.
"By generating more renewable energy in the UK, we can ensure greater energy independence by moving away from volatile global fossil fuel prices, all while driving down the cost of new energy."
The government claims the previous schemes have been a huge success, bolstering Britain's offshore wind capacity to power around 8 million homes - still a way off from a target laid out over a year ago, claiming that all UK homes could be powered through offshore wind by 2030 - with an ultimate goal of 40GW capacity by the decade's end.
The UK currently boasts the largest offshore wind capacity in the world with a little over 10GW as of 2020 - around 35% of the world's total.
Previous rounds of funding have also allowed the UK to "strengthen" its renewable supply chains, which could make future projects funded through CfD schemes to become both cheaper and energy-efficient.
1GW of the UK's offshore wind capacity should be delivered through floating turbines, Kwarteng revealed.
Dan McGrail, the CEO of UK-based energy trade association RenewableUK said this stands to be the largest ever renewable energy auction held in the UK, describing it as a "landmark".
The government will be removing the capacity cap - the amount of energy each contracted company is allowed to generate - as a further way to sweeten the deal in all funding brackets except for those done under emerging technologies.
"More than 16GW of wind could be ready to compete and over 23GW of renewables overall. We could see investments of over £20 billion in this round, creating thousands of jobs and cutting costs for energy consumers", McGrail said.
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"We need a range of renewable technologies to get us to net zero as fast as possible, so it’s great to see the development of innovative floating wind and tidal stream projects supported by ring-fenced funding, as we’ve been advocating. This will enable us to ramp up the roll-out of these cutting-edge technologies, building up massive industrial opportunities for the future, including exports", he added.
The UK aims to completely decarbonise by 2050, and switching away from fossil fuels is a big part of this.
Getting into renewable energy early is a safe way to reduce prices for both infrastructure and generation, which will incentivise further investment and rapid adoption.
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