The UK government has demonstrated international leadership in setting consecutive tidal stream ringfences in its renewable auctions. With the last ringfence set at £10 million for allocation round 5 (AR5), we expected around 20MW of tidal stream capacity to be contracted or 2 to 3 successful projects.
Results day brought a welcome surprise with 11 successful tidal stream contract bids, totalling over 53MW across 7 projects.
We are now on course to have over 100MW of tidal stream capacity deployed in the UK by 2028, a turning point in progress towards harnessing this entirely predictable renewable resource.
How did the results out-perform the industry expectations?
AR5 had a two-pot structure, which split ‘established’ technologies like wind and solar in pot 1 (with a budget of £190 million), and ‘emerging’ technologies like floating wind, tidal stream, and wave, competing in pot 2 (with a budget of £37 million).
Due to floating offshore wind not securing any contracts, tidal stream had access to a much larger budget than expected. Rather than just £10 million, tidal stream secured over £28 million of annual subsidies in AR5.
Given its key role in the UK’s future energy mix it is understandable that the failure of both fixed and floating offshore wind to secure CfD support in AR5 has been the focus in post-results coverage. However, the transition to net zero will require a diverse energy mix. It is therefore important to learn the lessons of what went wrong for offshore wind and what went right for tidal stream in AR5.
Clear successive support is building momentum
The first ringfence introduced in 2022 saw four successful bids. The second nearly trebled this amount to eleven.
Due to the CfD budgets and ringfences being set on an annual basis, the sector does not yet have certainty that the ringfence will continue in AR6 and beyond. The government can bolster investor confidence by setting out a clear commitment to ongoing ringfenced support or consider other suitable alternatives which would provide clarity to the sector. This can be achieved through setting a target for tidal stream as the government has for other technologies critical for net zero.
The Marine Energy Council is calling for a target of securing 1GW of tidal stream by 2035.
This will encourage investment in UK industry and supply chains that are key to delivery. Tidal stream projects are currently being delivered with over 80% UK supply chain spend and we can embed this in future deployments in the UK and around the world, exporting great British innovation, technology, and expertise.
The tidal stream industry is ready for a £30m ringfence
The government can make AR5 a turning point for the sector by setting a £30 million ringfence for AR6. That way the tidal stream industry can benefit in tandem with (rather than in the absence of) floating offshore wind bids, and deployment towards realising the UK’s 11GW+ of tidal stream potential can be expedited.
Successive support has secured tidal stream contracts in Scotland and Wales. However, there is yet to be a successful bid in England, despite its rich resource. By setting the ringfence to £30 million, the government will create the conditions that enable deployment across Great Britain, whilst enabling cost-reduction through economies of scale, volume, and accelerated learnings.
Increasing the ringfence ambition will support delivery of a diverse energy mix that is critical to energy security. Research by the University of Edinburgh has shown that delivery of just over 6GW of tidal stream would lead to a reduction in energy system cost of over £1 billion per annum. With tidal stream, the UK can benefit from onshore supply chains and predictable renewable generation whether the wind is blowing, or sun is shining.
Ensure administrative strike prices (ASP) are set at levels that enable deployment
Whilst tidal stream was the best performing technology in terms of its % saving against ASP in AR5, the sector is not immune from rapidly increasing supply chain and capital costs. Ensuring these increases are accurately reflected in the ASP methodology will be critical in delivering on the government’s ambition for wind and supporting emerging technologies such as tidal stream being built and deployed in the UK.
The change from biennial to annual auctions means that its timelines have become compressed. The Department for Energy Security and Net Zero is set to announce the core parameters of AR6 in mid-November. This will include pot structure and ASPs, before the full parameters (including budgets and ringfenced budgets) are announced in March next year.
AR5 can be a turning point for tidal stream. Government decisions taken over the next five months will reveal if it is ready to seize the potential in the British seas and maintain the momentum it has created.