New offshore wind farms will deliver electricity to British households at a record low price under contracts awarded by the government yesterday.
Ministers announced agreements to support the construction of 11 gigawatts of new renewable power generation, which could generate enough energy to supply 12 million homes.
The biggest contract awards were for five new offshore wind farms that are due online from 2026 and have contracted to sell power to consumers at £37.35 per megawatt-hour — a fraction of the cost of generating electricity in gas-fired power stations at present.
It beats a previous record low for offshore wind of £39.65 set in 2019. Orsted, Vattenfall and ScottishPower were among the successful developers.
Ministers also awarded contracts to ten new Scottish onshore wind farms at a price of £42.47 per megawatt-hour, and to dozens of solar farms at a price of £45.99 per megawatt-hour. For the first time, floating offshore wind and tidal stream were also included.
The prices are all expressed in 2012 money and indexed to inflation but even then would be supplying electricity at less than a third of recent wholesale market prices, which have soared because of the high cost of gas used in gas-fired power plants. Analysts at the Energy and Climate Intelligence Unit estimated that if wholesale electricity remained as expensive as during the current gas crisis, the new projects could cut electricity costs by £7 billion a year or £100 per household.
Britain has about 10 gigawatts of offshore wind in operation but is pursuing a highly ambitious target of 50 gigawatts by 2030.
Kwasi Kwarteng, the business and energy secretary, said: “Eye-watering gas prices are hitting consumers across Europe. The more cheap, clean power we generate within our own borders, the better protected we will be from volatile gas prices that are pushing up bills.”
ScottishPower was one of the biggest winners from the auction, securing contracts for five onshore wind farms and ten solar sites as well as its East Anglia Three offshore wind farm.
Keith Anderson, chief executive of ScottishPower, said offshore wind was now cheaper than onshore because of the greater size and scale of projects offshore. The greater yield from each offshore turbine “changes the economics quite dramatically”, he said. In addition, offshore wind projects had tended to lock in supply chain contracts further in advance, insulating them from surging costs. Onshore wind and solar projects that were quicker to build had probably not secured their supply chain contracts and were more exposed to inflationary pressures, he said.
Melanie Onn, deputy chief executive of RenewableUK, said that “thanks to the rapid construction times of new onshore wind and solar sites, billpayers will start to feel the benefits of today’s auction next year”.