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Offshore wind farm subsidy costs drop to record lows in latest contract round

Prices have fallen to £74.75 per megawatt hour for projects delivered in 2021/22 and £57.50 for projects in 2022/23.

Subsidies for new offshore wind farms have plummeted in the latest round of contracts being awarded for clean energy projects.

Figures from the new Government auction for the contracts – which guarantee a set price for power from schemes such as offshore wind farms – reveal the cost of subsidies for the technology have fallen 50% since early 2015.

Three offshore wind farms were among 11 schemes to have successfully bid for subsidies in the latest auction, with prices as low as £57.50 per megawatt hour (MWh) of electricity for wind projects being delivered in 2022/23.

They will provide enough electricity to power 3.6 million homes, the Government said.

The “astounding” results of the auction show offshore wind prices have fallen well below that of nuclear power and lower even than gas, according to the industry.

Technological developments such as bigger turbines and the growth in the UK supply chain have helped contribute to the falling prices.

The latest eight megawatt (MW) turbines stand almost 200 metres (650ft) high, taller than London’s Gherkin, and produce enough electricity to power a home for 29 hours with a single rotation of their blades, with even bigger units in the pipeline.

Ministers said the offshore wind industry would deliver £17.5 billion investment in the UK up to 2021 and the new projects would create thousands of jobs in British businesses.

Energy and Industry Minister Richard Harrington said: “We’ve placed clean growth at the heart of the Industrial Strategy to unlock opportunities across the country, while cutting carbon emissions.”

He said the Government would be setting out ambitious proposals to seize industrial opportunities from low-carbon development in its forthcoming “clean growth plan”, due to be published in the autumn.

Industry body RenewableUK’s chief executive Hugh McNeal said the “record-breaking” cost reductions were unprecedented for large energy infrastructure, and onshore and offshore wind were now cheaper than both new nuclear and gas.

“Today’s results are further proof that innovation in the offshore wind industry will bring economic growth for the UK on an industrial scale,” he said.

He urged the Government to continue to hold competitive auctions for future projects and put wind at the heart of its industrial strategy.

Lawrence Slade, chief executive of energy industry body Energy UK, said the results showed what could be achieved by providing the necessary certainty for investment.

He called on the Government to set out ambitious long-term plans for continuing the trend in the clean growth plan, and provide certainty over future auctions which would allow all technologies to compete for contracts.

The falling prices reignited the debate over the future of nuclear power, with Caroline Lucas, co-leader of the Green Party, saying the massive price drop for offshore wind should be the “nail in the coffin” for new reactors.

But Tom Greatrex, chief executive of the Nuclear Industry Association, said one technology alone could not solve the UK’s power challenge, and the full range of low-carbon energy would be needed to power UK homes and businesses.

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