With the benefit of a day or two of reflection following the announcement of the AR7 budget, my underlying feeling is one of mild bemusement. It has landed as a somewhat frustrating contradiction. Everyone has noted the smaller than expected budget. It’s looking like we’ll get in the region of 5 GW, give or take a little – see our graph below.
The contradiction challenge is simply “Why?”. The low budget is a contradiction primarily of the Government’s own messaging, but also in its stated wider ambitions. Let’s take a deeper look at each.
Messaging – Work we did for Scottish Renewables earlier this year projected that the UK offshore wind pipeline was likely to miss the CP2030 targets. Even so, we estimated around 12.5 GW of capacity would be eligible for AR7. In fact, the pipeline at the time suggested an annual average of 12.5 GW each for ARs 7 to 10 inclusive – massive numbers, but still not quick enough to meet CP2030 targets. Then the news came that eligibility criteria for AR7 was to be relaxed, allowing up to 20 GW to qualify. Not only that, but the Government extended the contract period from 15 to 20 years. Great news! But then here is the contradiction – why expand an already massive 12.5 GW potential to 20 GW, then only provide enough budget for 5 GW? We all agree on the need for some level of competitive tension, but a budget for 10 GW would still mean 50% attrition – and even that feels too high for an industry that is encouraged to be on the front foot, with optimism and ambition, and has invested hundreds of millions in getting projects to the stage they are at.
Ambitions – As noted above, the pipeline as it currently stands is already likely to miss the CP2030 targets for offshore wind. These are Government targets, not industry’s – so why have a budget which will actively restrict your own ambitions? In addition, there is the “hard-to-win-but-nevertheless-true” commercial argument that wind generated electricity is both cheaper and cleaner than fossil-based electricity. We all know why this is a difficult argument to make at the moment (electricity market reform, anyone?) but the challenge of political and social messaging should be kept separate from the underlying facts. Good work and reporting in this space is emerging (see this Guardian article on a recent UCL study) which (we can hope) will help turn the tide on this. Plus, we as an industry have loads of positive things to say on jobs, local value-add, and how we are able to support the wider “just transition” that is also a cornerstone policy.
So, the question remains – why set out a small budget which contradicts both your own messaging and your own ambitions?
The unsatisfactory answer would be that budget/political pressures are the cause – to help address a weakening position against rising anti-net-zero politics from Reform and others, the Government must be seen to be withdrawing support. This would be short-sighted, weak, and terribly damaging to what we must assume to be their strongly held beliefs in a net-zero future that benefits us all.
The more positive answer would be that it is a deliberate and considered move to help steady the bigger ship. That the Government acknowledges there are infrastructure challenges in ports, grid, and the wider supply chain, and that going too fast at this stage risks greater disappointment further down the line when bottlenecks kick-in and frustration mounts. I think most of industry would at least understand the logic of this, and any short-term frustration would be addressed by a continued and upgraded commitment for AR8 and beyond.
If this is the reason for the small AR7 budget, then they would do everyone, including themselves, a huge favour by verbalising it. We have an amazing pipeline in the UK, with the opportunity to lead the world in scale and innovation – even more so when considering floating projects. But this ship is a fragile thing, and needs clarity and consistency of vision, as well as realism, to keep it moving at the right speed in the right direction. We all know that success in offshore wind, as a huge infrastructure play, is based on trust and collaboration between industry and government, Bemusement can come into all relationships at times, but it is best addressed with good talking and quality listening.
A version of this blog also appears on Riviera https://www.rivieramm.com/news-content-hub/reflections-on-ar7-a-frustrating-contradiction-86621
