The UK's net-zero ambitions suffered a major setback today, with offshore wind-farm developers putting question marks against new projects because of a shortfall in government funding.
No new offshore-wind facilities are included in the latest annual round of renewable contracts announced this morning.
There were five major schemes, with a total capacity of 5GW, eligible to bid for contracts to boost the country's current 14GW of offshore wind.
But industry sources told the Telegraph last night that none were bidding into the process, because the government failed to offer sufficient prices for their energy.
Blow
The outcome deals a blow to the government’s ambitions to install 50GW of offshore capacity by 2030, and remove fossil fuels from the electricity grid by 2035.
UK Energy and Climate Change Minister Graham Stuart tried to put a brave face on today's news.
He said: "While offshore and floating offshore wind do not feature in this year’s allocation, this is in line with similar results in countries including Germany and Spain, as a result of the global rise in inflation and the impact on supply chains which presented challenges for projects participating in this round."
Developers will now wait for the next round in 2024 before deciding whether their next step.
Contracts
Every year, wind-farm developers bid for contracts to build new projects that supply electricity at a price guaranteed by the government.
But industry sources say the prices offered by the government in this year’s round have been too low amid rising global supply chain costs and growing competition from the US, Europe and China.
Among those companies which flagged up doubts about bidding for contracts was energy giant SSE, which was eligible to bid for its Seagreen 1A project off the Angus coast. The company’s chief executive previously said the government had set prices “at the wrong level”.
And, earlier this year, Danish energy giant Orsted warned that rising costs might threaten its ability to continue with its Hornsea 3 project off the North Sea, which already has a government contract for its electricity.
Guaranteed prices
The government has ignored calls to significantly increase the guaranteed prices offered to developers, pushing back against their concerns during meetings with the industry.
“The Treasury has been repeatedly warned that their modelling no longer matches reality, and they did not listen,” one industry source said.
As a result of the failure to build, bill payers will be worse off by around £1billion a year because of lost renewables, which are significantly cheaper than current gas prices, according to the Energy and Climate Intelligence Unit think tank.
Failed energy policy
Labour's shadow energy secretary Ed Miliband told the BBC: "This is just the latest episode in the Tories' 13 years of failed energy policy. They broke the onshore wind market by banning it (south of the border), they undermined the solar industry by removing the feed-in tariff, and they caused chaos in the home-insulation market with their failed schemes.
"Every family and business is paying the price for these failures in higher energy bills, and our country remains exposed."