The UK CFD Round 3 Auction results were announced today:
- Big day for offshore wind. 5.5GW to be built at less than forecast wholesale price, but are the losers really losers?
- 5GW of the 5.6GW to be built on Dogger Bank: HVDC fully competitive
- Disappointing news for Scotland offshore with only 466MW of about 3.1GW successful – the double whammy of deep water and high grid charges
- Good news for onshore wind with 275W of remote island wind
These strike prices show the extraordinary progress the industry has made to reduce prices. Above all, they are good news for the consumer and the drive to limit climate change These prices are in effect price stabilisation rather than subsidy.
The question is whether other developers declined to bid low and preferred to accept merchant risk, probably also with corporate PPAs . The industry has been contemplating this route for some years now but the focus onshore seems to have been on getting the government to shift to allow mainland onshore CfDs. Could offshore wind now be taking a lead here? It’s a brave new world but we have highly experienced global developers who understand the electricity market as well as anyone.
For the first time in over 8,000 years, human activity returns to Dogger Bank with the construction of 5GW of offshore wind between 2023 and 2025. The big news from today’s UK CfD Round 3 Allocation Round announcements is not only the game-changing low prices but also that 5GW of 5.6W will be built using HVDC grid connections. With East Anglia THREE unsuccessful, is the lesson here that you can compete being far offshore or in deep water, but you can’t compete with both (yet) – or is it that Scottish Power prefers the Corporate PPA route?
On the face of it the results are disappointing news for Scotland, with only 466MW of offshore wind successful, and this has big implications for the ScotWind leasing round. It’s hard to see what can be done on grid charges and the hope for Scotland will be that the next generation of turbines forces all projects to use jackets, thereby closing the gap between shallower and deeper projects. Perhaps then Scotland’s superior wind speeds could then give its wind farms a competitive advantage? Or maybe the results force a differentiating strategy focussed on floating?
It’s a big day for remote island onshore wind, with 275MW successful, all backed by independent developers. If remote island wind can achieve these prices with expensive HVDC grid connections, what does this say about the prices that mainland onshore wind can achieve? Clearly, that needs to be comfortably ‘subsidy free’ or will offshore wind fully take over, in the windiest country in Europe?