Price of offshore wind power at record low

The price of offshore wind power has fallen to a record low amid growing competition among developers in a boost to Britain's attempt to ditch fossil fuel imports.

Developers have agreed to build new farms for a guaranteed electricity price of £37.35 per MWh, beating the previous record of £39.65 per MWh set in 2019. The prices have fallen more than 65pc since 2015, when they were almost £120 per MWh.

Britain has secured electricity from 93 renewable projects expected to come online between 2024 and 2027, in a new auction round announced on Thursday. Officials said the 11GW contracted could power up to 12m homes or 40pc of the total.

Tidal stream power is included for the first time, alongside offshore and onshore wind and solar power.

It comes as households are struggling with soaring energy bills due to global shortages of natural gas worsened by Russia’s war on Ukraine.

Kwasi Kwarteng, the business secretary, said: “The more power we generate within our own borders, the better protected we will be from volatile gas prices that are pushing up bills.”

The Government wants to increase offshore wind capacity five-fold as part of an energy security strategy set out in the wake of Russia’s war on Ukraine.

Wind farms and other renewable developers are backed by government guarantees on the price of electricity, known as contracts for difference, which are now awarded every year.

Under the scheme, developers are guaranteed a price for their electricity, known as the ‘strike price’. If the wholesale price when they are generating falls below the strike price, developers are paid the difference via a levy on consumer bills. However, when the wholesale price is higher than the strike price, they do not get to keep the difference.

The wholesale price of electricity is currently extremely high due to high costs of gas, at around £190 per MWh, compared to long term averages before 2021 of around £50 per MWh.

Five offshore wind farms have been granted a strike price of £37.50 per MWh in the latest auction round, with a total capacity of 7GW. These include Vattenfall’s Norfolk Boreas project and Orsted’s Hornsea offshore wind farm.

Contracts have also been awarded to several planned solar projects, a total capacity of 2.2GW, at a price of £45.99 per MMh, and onshore wind projects in England and Scotland at £42.47 per MWh. Small, early stage tidal stream power projects have also been backed, at a price of £178.54 per MWh.

Melanie Onn, deputy chief executive of trade body RenewableUK, said: “Today’s record-breaking auction results show there is a way to replace unaffordable gas with low-cost clean power.”