The government’s green energy plans have been dealt a blow after firms snubbed an auction for contracts to run new offshore wind sites, sparking warnings of higher household bills.

There were successful bids for onshore wind, solar, tidal and geothermal projects to supply the grid with electricity.

However, there were none for offshore turbines, which provide the backbone of the UK’s renewables system.

Insiders had warned the process had struggled to attract bidders because the government has set the maximum price generators can receive as too low, failing to reflect the rising costs of manufacturing and installing turbines.

The industry has been hit by inflation that has seen the price of steel rise by 40%, supply chain pressures and increases in the cost of financing.

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This year offshore wind producers were allowed a maximum bid of £44 per megawatt hour (MWh) of electricity, compared to £155 per MWh in 2015, based on adjusted figures.

The outcome of the auction is a setback to ministers’ pledge to deliver 50 gigawatts (GW) of offshore wind by 2030, from 14 GW currently.

Energy and climate change minister Graham Stuart said: “We are delighted that our first annual contracts for difference auction has seen a record number of successful projects across solar, onshore wind, tidal power and, for the first time, geo-thermal.

“Offshore wind is central to our ambitions to decarbonise our electricity supply and our ambition to build 50GW of offshore wind capacity by 2030, including up to 5GW of floating wind, remains firm.

“The UK installed 300 new turbines last year and we will work with industry to make sure we retain our global leadership in this vital technology.”

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‘Prices have been set too low for the sums to add up’

With offshore wind turbines now producing electricity much cheaper than gas power plants, experts have warned the failure to expand the sector threatens higher bills, undermines the country’s energy security and risks the UK’s position as a world leader in the industry.

Keith Anderson, the chief executive of ScottishPower, which is one of the key builders of wind power in the UK, said: “This is a multi-billion pound lost opportunity to deliver low-cost energy for consumers and a wake-up call for government.

“ScottishPower is in the business of building wind farms and our track record is second-to-none in terms of getting projects over the line when others haven’t been able to. But the economics simply did not stand up this time around.”

Read more:
Government to relax onshore wind planning rules
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Labour’s Ed Miliband branded the outcome of the auction an “energy security disaster” that would push up household bills.

The shadow energy security secretary said: “The Conservatives have now trashed the industry that was meant to be the crown jewels of the British energy system, blocking the cheap, clean, homegrown power we need.

“Ministers were warned time and again that this would happen, but they did not listen.

“They simply don’t understand how to deliver the green sprint, and Rishi Sunak’s government is too weak and divided to deliver the clean power Britain needs.”

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“Who wants to open their curtains to a wind turbine?”

Sue Ferns of the Propsect union said: “Businesses and workers stand ready to deliver a rapid rollout of renewables but the government’s failure to set sustainable prices is holding the industry back.”

Greenpeace UK’s policy director, Doug Parr, said: “This monumental failure is the biggest disaster for clean energy in almost a decade.

“Thanks to cost pressures and inept government policy, this auction round has completely flopped – denying bill payers access to cheap, clean energy and putting the UK’s legally binding target of decarbonising power by 2035 in greater jeopardy.”

Luke Murphy of the IPPR think tank said “This was an avoidable yet deeply harmful failure of government policy and planning.

“The UK will miss out on billions in green investment, cheaper energy bills, and lower emissions as a result, and cement the idea that the UK has somersaulted from a clean energy leader to laggard.”