Plans by the government to meet 40GW of offshore wind by 2030 represent a “major challenge” for the industry and will have “significant effects” on the energy market if achieved.
The Conservative Party made the pledge, which would increase current offshore wind capacity almost five fold, in its 2019 manifesto.
Analysis by Aurora Energy Research published today (6 February) found that in order to meet the target an average annual installation rate of 260 turbines will need to be sustained over 5 years – equivalent to one turbine installed every weekday throughout the whole of the 2020s.
This assumes the turbines installed will be three times larger than those installed between 2011-15, at 10-12MW per turbine.
Almost 10GW of offshore wind capacity has already been contracted to come online during the 2020s.
An additional 20GW of capacity will need to be procured through the Contract for Difference (CfD) scheme, of which 17GW is yet to receive full planning consent.
Increasing the offshore wind capacity will require a steep increase of investment, with £48 billion estimated to be needed during the next decade to reach the 40GW target – double the estimated £24 billion invested into offshore wind during the 2010s.
Furthermore, the research adds, higher levels of offshore wind will have a number of impacts on Britain’s electricity markets.
These include lower capture prices for renewables which will increase payments to both existing and future CfD supported projects.
It adds that assuming future offshore projects secure an average strike price of £40/MWh, the cost of reaching the target through CfDs would be a further £2.6 billion annually – almost five times the current budget of £557 million.
However trade association Renewable UK said it did not recognise the £2.6 billion figure.
“The latest CfD auctions showed that the cost of offshore wind has fallen by two-thirds since 2015, with contracts securing new power at below the current market price”, a spokesperson said.
The plans would see lower baseload prices which would reduce the total cost of the wholesale market to consumers, Aurora claims.
Furthermore, they would lead to higher capacity market prices which would would have an “upwards impact” on total system cost, the report says. Prices will be higher due to the increased revenue that plants will require to stay economic in the face of lower wholesale revenue.
Aurora adds that through the increasing level of subsidised offshore wind in the system, these factors combine to represent larger government intervention in the power markets and reduce the amount of capacity which is exposed to purely market forces.
This, it warns, may put at risk onshore wind and solar PV projects which developers are attempting to bring forward on a fully merchant basis without direct government support.
Martin Anderson, head of GB Renewables at Aurora Energy Research and co-author of the report, said: “The government’s 40GW target sets GB’s energy sector on a pathway towards the wider ambition of becoming net zero by 2050.
“Our analysis suggests that meeting this target will require a huge increase in the deployment rate of offshore wind turbines, alongside significant capital investment, and planning consents to be approved in record time.
“Whilst offshore wind has demonstrated significant cost reductions in previous auctions, the impact of higher levels of renewables in the system will reduce offshore wind capture prices and the subsidy support schemes will require further budget.
“Should this target be achieved it would have wide implications for existing investors in the GB power system and represent significant Government involvement into the liberalised electricity markets.”