No new offshore windfarms will go ahead in the UK after the latest government auction, in what critics have called the biggest clean energy policy failure in almost a decade, our energy correspondent Jillian Ambrose explains.
None of the companies hoping to build big offshore windfarms in UK waters took part in the government’s annual auction, which awards contracts to generate renewable electricity for 15 years at a set price.
The companies had warned ministers repeatedly that the auction price was set too low for offshore windfarms to take part after costs in the sector soared by about 40% because of inflation across their supply chains.
The government confirmed on Friday that only 3.7 gigawatts of new clean energy projects secured a contract, compared with 11GW in the previous auction – a significant blow to the UK’s clean energy targets.
The winning projects include solar farms, onshore windfarms and a record number of tidal power projects. However, the absence of giant new offshore windfarms will make the UK’s climate targets far more difficult to achieve.
The government’s “energy security disaster” means the UK will miss out on billions in investment and may also push up bills for hardworking households, the Labour party warned.
Industry insiders said the three biggest offshore wind developers in the UK – SSE, ScottishPower and the Swedish company Vattenfall – were forced to sit out the bidding after ministers refused to heed their warnings.
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In another sign of weakening in the UK housing market, the number of planning permissions granted across England for new houses has fallen to a record low.
The Home Builders Federation (HBF) said planning permissions continued to fall “sharply”, with the number of homes approved in first half of 2023 down by 19%.
The latest data confirms industry warnings that in the midst of an increasingly “anti-development” policy environment and worsening economy, the number of homes built in the coming years could fall to record low levels, said the HBF.
Around 2,456 projects were granted planning permission during the second quarter of the year, the lowest since similar records began in 2006, said the report.
This number is 10% lower than the previous quarter and 20% lower than a year ago.
Three geothermal projects have won government support in today’s auction for renewable energy support.
The Manhay, Penhallow and United Downs projects, all in Cornwall, were all allocated support through the Contracts for Difference Allocation Round, to produce a total of 12MW of power.
Conservative MP Kieran Mullan, who produced an academic study into geothermal for the government this year, has welcomed this “landmark investment”.
That report found that many areas with the greatest geothermal potential lie beneath the towns and cities most in need of investment.
Mullan says:
“The government has stepped up its investment in deep geothermal in a big way today, funding not one but three deep geothermal plants. This follows on from the first UK deep geothermal heat plant being in 37 years being switched on at the Eden project in Cornwall this summer.”
“This just proves the huge potential out there. These projects will deliver clean, reliable electricity that doesn’t wax and wane with the weather like wind and solar. I hope this is just the start of what could be an important part of our transition, particularly when it comes to heat where there are even more potential sites.
Deep geothermal energy is heating more than 250,000 homes in Paris and many more across Europe. It is a clean, green, reliable resource. I got to see for myself how quietly and efficiently this hot water can be utilised visiting a plant in Germany.
No one would know the little building I visited next to a park and a school was heating the local swimming pool, businesses, town hall and hundreds of homes.”
Berkeley Group has become the latest house builder to be hit by slowing demand for new homes.
Reservations for new homes at the upmarket builder have fallen 35% by value in the last four months, reflecting the “elevated macroeconomic and political volatility”.
However, prices are “resilient” and it still expects to make a pretax profit of at least £1.05bn in the current year and beyond.
Like other builders, Berkeley complained about the planning system, and has not bought any land, saying:
“The complexity and protracted nature of the current planning system and lack of clarity surrounding certain regulatory changes affecting our sector, at a time of considerable uncertainty for the UK economy with persistent high inflation and interest rates, continues to deter investment into brownfield regeneration and the wider housebuilding sector.
Consequently, Berkeley has not acquired any land in the period and will only invest very selectively in new opportunities.”
Richard Hunter, head of markets at interactive investor, said:
“In some ways, Berkeley is a different beast to many of its competitors, with a potential edge coming from its mix of an exposure to London and the South East, higher-end properties and the regeneration of brownfield sites in which it is well accomplished. The group has also reined back its land acquisition, making no purchases in this period and with the intention of only investing very selectively in new opportunities.”
But he added:
“Berkeley is far from being immune to the wider issues of mortgage availability and affordability, planning bottlenecks, uncertain consumer propensity to buy and a cloudy outlook.”
World food price have fallen to their lowest level in two years, new data from the United Nations food agency shows.
The Food and Agriculture Organization’s (FAO) price index, which tracks the most globally traded food commodities, fell to 121.4 points in August, down from 124.0 for July. That’s the lowest since March 2021, according to Reuters.
It means global food prices are 24% below the peak reached in March 2022, after Russia’s full-scale invasion of Ukraine.
The drop reflected declines in the price indices for dairy products, vegetable oils, meat and cereals, while the sugar price index increased moderately, the FAO explains.
The UK government botched today’s offshore wind auction, say Friends of the Earth, who are urging the new energy secretary, Claire Coutinho, to sort out her “failing” department.
Mike Childs, Friends of the Earth’s head of policy, said:
“The failed offshore wind auction was highly predictable. The government has missed yet another open goal that would have boosted energy security and made household bills more affordable.
“Since energy bills shot up last year, ministers have refused to invest in home insulation, despite our housing stock being amongst the worst in Europe and failed to unleash the full potential of our vast onshore wind resources. This week’s wind reforms don’t go nearly far enough.
“Now it’s botched an auction that should have led to a boom in offshore wind with all the economic benefits this would bring. The new Secretary of State, Claire Coutinho needs to get a grip on her failing department - and quickly.”
No new offshore windfarms will go ahead in the UK after the latest government auction, in what critics have called the biggest clean energy policy failure in almost a decade, our energy correspondent Jillian Ambrose explains.
None of the companies hoping to build big offshore windfarms in UK waters took part in the government’s annual auction, which awards contracts to generate renewable electricity for 15 years at a set price.
The companies had warned ministers repeatedly that the auction price was set too low for offshore windfarms to take part after costs in the sector soared by about 40% because of inflation across their supply chains.
The government confirmed on Friday that only 3.7 gigawatts of new clean energy projects secured a contract, compared with 11GW in the previous auction – a significant blow to the UK’s clean energy targets.
The winning projects include solar farms, onshore windfarms and a record number of tidal power projects. However, the absence of giant new offshore windfarms will make the UK’s climate targets far more difficult to achieve.
The government’s “energy security disaster” means the UK will miss out on billions in investment and may also push up bills for hardworking households, the Labour party warned.
Industry insiders said the three biggest offshore wind developers in the UK – SSE, ScottishPower and the Swedish company Vattenfall – were forced to sit out the bidding after ministers refused to heed their warnings.
A measure of UK employment trends used by the Bank of England has shown that employers fear a recesssion and are cutting back on new hiring.
The latest KPMG and REC, UK jobs report found that the number of employers hiring sank to its lowest since 2009, excluding the Covid-19 pandemic period, while the number of people looking for work remained steady.
One analyst said the report, compiled by S&P Global, indicated that the economy was showing clear signs of strain after 14 consecutive interest rate rises and put pressure on the central bank’s monetary policy committee (MPC) to halt further increases in the cost of borrowing at the next meeting later this month.
“In one line,” the jobs report supported “a swift conclusion to the MPC’s tightening cycle,” said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.
The permanent staff placements index fell to 38.9 in August, from 42.4 in July. It averaged 54.2 in the second half of the 2010s, and 55.3 in 2022, said Tombs. A number below 50 indicates contraction.
The permanent staff availability index, which measures the number of people using recruiters to look for work, edged down to 60.3 in August, from 61.4 in July, but remained well above its 38.0 average in the second half of the 2010s, and its 37.6 average in 2022.
Salary rises also remained broadly steady, with the permanent staff salaries index at 58.2 in August, compared to 58.3 in July. It averaged 60.0 in the second half of the 2010s, and 71.8 in 2022, said Tombs.
“August’s jobs survey provides more ammunition to the core members of the MPC -governor Andrew Bailey and chief economist Huw Pill – who have recently expressed their view that interest rates probably don’t need to rise much further, if at all, in order to sustainably return inflation to the 2% target.”
The MPC regularly comments on REC surveys in its quarterly assessment of the economic outlook, using it as a benchmark for the health of the recruitment market.
Tombs cautioned that the REC survey had proved to be “too gloomy in signalling declining employment” over recent months compared with official employment data from the Office for National Statistics, which has shown permanent staff numbers edging up.
Tombs said:
“The survey is based on recruiters, not firms, so it isn’t registering the recent trend for businesses to hoard labour, due to fears they may not easily be able to replace them further ahead.”
A separate survey of employers by S&P Global showed that they were still adding to their workforces in August, though only modestly.
“We think the reality lies somewhere in between the REC and S&P surveys, and that employment likely will flatline in the second half of this year.
Neil Carberry, REC chief executive, said:
“August is always a slower month for new permanent roles, but this has been exacerbated in 2023 by the lack of confidence to start the new hiring we saw among firms in the Spring.
“As inflation begins to drop, it is likely that firms will return to the market later in the year – employer surveys suggest confidence may be returning. But for now, the labour market has more slack than it has since the heights of the first lockdown. Firms continue to use temps to fill any short-run needs, with the small drop in August representing little change from the past few months.”
The latest bulletin from the ONS showed employment and job vacancies were down, while unemployment and redundancies were up.
Elsewhere in the energy world, European gas prices have jumped after some Australian energy workers began a strike.
The month-ahead price of European natural gas is up 15% this morning, to €35.35 per megawatt hour, the highest since Monday.
UK month-ahead gas contracts are up 9.5% at 87p per therm.
The jump came after liquefied natural gas workers working at Chevron sites in Australia began partial strikes today, after talks failed to reach an agreement in a dispute over pay and conditions.
The Chevron units, at Gorgon and Wheatstone, produced about 7% of global LNG supply in 2022 according to Bloomberg.
The renewables auction outcome is a major setback to the acceleration of green energy in the UK, warns Simon Virley CB, Vice Chair and Head of Energy and Natural Resources at KPMG:
“The lack of new offshore wind projects in the UK Contracts for Difference (CfD) auctions is a major setback at a critical time when we should be looking to accelerate renewables. After record breaking rounds in previous auctions, this is the first time since CfDs launched in 2015 that there have been no new offshore wind projects announced and will call in to question the Government’s target of 50GW by 2030 and the ambition to get to a Net Zero power system by 2035.
Virley adds that the government must urgently review the parameters of its auction ahead of the next round of bidding, to recognise the need for higher guaranteed prices for offshore wind:
“This outcome reflects the growing inflationary and supply chain pressures affecting the offshore wind sector in recent years, which is making it harder to deliver these projects at the strike prices and other auction parameters set by the Government. The Government will need to review urgently these parameters ahead of Auction Round 6, if it wants the British success story on offshore wind to continue.”
RenewableUK, the trade associaion for the renewable energy industry, is calling for urgent action to restore investor confidence, after offshore energy developers shunned the UK’s renewables auction.
They warn that today’s clean power auction risks undermining targets to boost energy security and could also jeopardise the industrial opportunities of offshore wind.
RenewableUK explains that the results of the 5th round of Contracts for Difference (CfD), published this morning, show that 3.7 gigawatts (GW) of new renewable capacity was successful overall.
That’s the lowest level since 2017 – and just over a third of the 10.8GW in last year’s auction.
With no offshore wind developers taking part in this year’s auction, future auctions will now have to support 4.5-5.8GW a year to get the UK on track to hit the Government’s 50GW offshore wind target for 2030
RenewableUK CEO Dan McGrail says today’s results are “a major blow for consumers”:
“Industry has warned that rising costs should have been properly priced into this auction. If the UK isn’t offering prices that allow investors to make a return, they will simply invest elsewhere. These results should set alarm bells ringing in Government, as the UK’s energy security and net zero goals can only be met if we have offshore wind as the backbone of our future energy system. We need the Government to show that the UK is open for business.
The failure to secure any new offshore wind is a major blow for consumers that could, and should, have been averted. Building wind farms means we stabilise the cost of energy for the long-term and reduce our dependency on fossil fuels, prices of which can be manipulated by dictators and despots. It’s not too late to get back on track, but without urgent changes, we risk pricing ourselves out of the global race for clean energy investment.
Renewables don’t only enable us to fight climate change, they also help to drive economic growth, creating jobs and supporting supply chains across the UK. This result for offshore wind means putting economic growth on hold, with over £10bn in investment and thousands of jobs delayed.
Chris Hayes, senior data analyst at think tank Common Wealth, argues that it makes more sense to make direct public investment on renewable energy projects, rather than guaranteeing prices to private firms.
Following this morning’s auction, Hayes says:
“The failure of this allocation round relative to initial expectations is testament to the limits of de-risking private investment as a route to mass buildout of renewables.
This regime subordinates our future energy system to private capital returns of a size and certainty that can only be secured at a great expense to the public, especially in this new climate of economic turbulence. Direct public investment could deliver this at a lower cost and with less operational vulnerability to changing circumstances.”
Newsnight’s economics editor, Ben Chu, has analysed today’s renewables auction:
Investment bank Jefferies says today’s renewables auction highlights the need for “a more joined-up approach between industry and government” to progress offshore wind development in the UK.
It is “simply mind blowing” that the UK government has failed to attract a single bid for new offshore wind projects, says Alethea Warrington, senior campaigner at climate charity Possible.
This negligence will lock us into reliance on dirty, expensive gas power for even longer. It is incredibly disappointing that, once again, the government has failed to seize the opportunity to sufficiently increase the UK’s supply of clean, cheap renewable energy.
“After a summer of record-breaking global heatwaves and as we face another winter of unaffordable energy bills, people across the UK will be unable to understand why the government is unwilling or unable to get on with the job of getting the UK off expensive, polluting gas with wind and solar power. The amount of new renewable energy which is being permitted to come through via the Contracts for Difference auctions is just far too small, and leaves us reliant on polluting, unaffordable power. Billpayers and our climate will pay the price for this poor policy-making by the government.
“The government must update the Contracts for Difference price caps to allow a new generation of renewable energy to power this country, bring down bills and slash our emissions.”
Seven tidal stream projects, which harness the power of the gravitational pull of the moon and the sun using floating or sea-bed mounted turbines, have secured contracts in the UK Government’s latest renewable auction.
They will generate an extra 53MW of tidal stream capacity by 2028.
Here’s the details:
Scotland
SAE Renewables, secured 21.94MW of capacity (Pentland Firth, MeyGen)
Orbital Marine Power, secured 7.2MW (Orkney, EMEC)
Magallanes secured 1.5MW (Orkney, EMEC)
Wales
Hydrowing secured 10MW (Ynni’r Lleaud)
Verdant secured 4.9MW (Anglesey, Morlais)
MOR Energy secured 4.5MW (Anglesey, Morlais)
Magallanes secured 3MW (Anglesey, Morlais)
Richard Arnold, policy director of the Marine Energy Council, says:
“This is a fantastic day for the industry and proof that with the right support tidal stream energy can play a key role in the UK’s future energy mix.”
“Successive support in renewable auctions could deliver over 100MW deployed in the UK by 2028. This will see more tidal stream projects in UK waters than the rest of the world combined.
The Government’s failure to recognise the impacts of inflation in supply chains could cost billpayers £1bn a year in lost savings from offshore wind, the Energy and Climate Intelligence Unit (ECIU) says.
Jess Ralston, Energy Analyst at the ECIU, explains:
“The renewables that were secured at this auction are still lots cheaper - a third for some technologies - than wholesale power prices which are set by gas.
“But the elephant in the room is the renewables that weren’t secured. We’ve potentially missed out on bill savings worth over £1bn from no offshore wind bids, which again would be far cheaper than the alternative gas.
That’s bad news for households, the industry and the Government - not a good look for outdated Treasury rules to be blocking cheaper bills ahead of the next Election.
“The industry says our offshore wind market, the second largest in the world, is ready to deliver. Will the government rerun this auction with sensible strike prices”
The Contracts for Difference framework (which guarantees a minimum price for energy) must be “urgently reformed” following today’s CFD auction results, argues Sue Ferns, senior deputy general secretary of UK union Prospect.
Ferns says
“These results are a disaster for the UK’s offshore wind industry.
“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.
“This is the latest sign that the government has given up on bringing down bills, creating clean energy jobs, and meeting its climate targets.
“The Contracts for Difference framework must be urgently reformed if we are to have any hope of decarbonising the energy system and delivering good jobs in the process.”
https://news.google.com/rss/articles/CBMihAFodHRwczovL3d3dy50aGVndWFyZGlhbi5jb20vYnVzaW5lc3MvbGl2ZS8yMDIzL3NlcC8wOC91ay1yZW5ld2FibGUtYXVjdGlvbi1jb250cmFjdHMtb2Zmc2hvcmUtd2luZC1lbmVyZ3ktc3RvY2stbWFya2V0LWJ1c2luZXNzLWxpdmXSAYQBaHR0cHM6Ly9hbXAudGhlZ3VhcmRpYW4uY29tL2J1c2luZXNzL2xpdmUvMjAyMy9zZXAvMDgvdWstcmVuZXdhYmxlLWF1Y3Rpb24tY29udHJhY3RzLW9mZnNob3JlLXdpbmQtZW5lcmd5LXN0b2NrLW1hcmtldC1idXNpbmVzcy1saXZl?oc=5
2023-09-08 10:52:30Z
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