The ongoing reduction in the cost of generating renewable energy continues to make the headlines. Offshore wind has relied on subsidies to be viable in the past and, for the overwhelming majority of projects, this remains the case. In the UK, the support mechanism works by providing project owners with a guaranteed price (strike price) for the electricity generated, and developers competitively bid for these CfD (contract for difference) awards. Therefore, the subsidy is the difference between this strike price and the wholesale electricity price. Each round has a maximum guaranteed price per MWh, but also a maximum overall budget for expected subsidies, so competition for support sees developers bidding below this maximum price in an attempt to secure an award for their project. The most recent awards have caused a significant stir in the industry.
The UK has established itself at the forefront of offshore wind activity with 5.1GW installed to-date. Latest forecasts from Westwood Global Energy Group show that the UK will continue to lead the offshore wind market, with 17.2GW of capacity planned for installation over the 2018-2026 period at a cost of 72bn EUR. When including expected additions from projects at the concept or speculative stages, however, this could rise to 19.8GW, with capital expenditure over 2018-2026 reaching $91bn.
UK Cumulative Capacity by Current Project Status, 2016-2026