Labour called for budget increase for new offshore wind projects

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The UK’s largest electricity producer has called on the Government to increase its budget to support new offshore wind projects if it is to meet ambitious targets to decarbonise the electricity system.

Tom Glover, RWE’s UK boss, said ministers risked securing “less than half” of the new generation capacity needed in the latest annual round of auctions for state support contracts.

“We would urge them to increase (the budget) significantly and make sure they get all the advice from the right experts to figure out how to do that,” he added.

The lobbying efforts by RWE and others are a test for the new Labour government, which is keen to show it is serious about meeting ambitious climate targets and avoiding a repeat of last year’s failed auction.

A Labour spokesman said Ed Miliband, the secretary of state, would “carefully consider” the possibility of increasing the budget after assessing the applications received.

The move comes after the new government took a series of steps within a week of taking office to deliver its energy strategy, including allocating £7.3bn to build ports, gigafactories and other infrastructure, and relaxing planning rules for onshore wind projects in England.

It is hoped that such moves will unlock investment from private sector companies such as RWE, which plans to invest around €8 billion in the UK by 2030, on top of the €3 billion it has invested from 2021.

Labour wants to quadruple the UK’s offshore wind capacity by 2030 as part of a plan to cut emissions from the electricity sector to net zero.

Offshore wind has been a success for the UK, supplying around 17 per cent of its electricity in 2023. The country is second only to China in terms of installed capacity.

But the sector has been in trouble in the past year due to rising commodity and financing costs. No offshore wind developer has bid for the UK’s state support contracts, known as contracts for difference, arguing that the support offered was too low.

Last year, the Conservative government raised the maximum price for electricity that the state is willing to guarantee to developers, as well as the overall budget, for this year’s auction round.

The budget does not specify how much developers will actually receive in state support, as the amount will depend on unpredictable future wholesale prices.

Instead, it is an estimate of the amount that could be paid under contracts each year, used in the auction to limit the number of projects that can be awarded contracts.

RWE and others say the current budget of £800m will not be enough to secure a huge number of new offshore wind turbines, given the government’s estimates of wholesale prices, which it says are flawed.

RenewableUK, an industry group, said the government should increase the offshore wind budget to £1.5bn to “drive more investment in projects that are ready to go”.

A spokesman for the Department of Energy Security and Net Zero said applications to participate in the auction round “are currently being assessed and the Secretary of State will carefully consider whether to increase the budget”.

He added: “Investing in clean energy will cut bills and make the UK energy independent, which is why we will double onshore wind, triple solar and quadruple offshore wind by 2030.