A Labour government will increase the size of the summer grant auction by 50% to £1.5 billion, providing record amounts of funding to clean energy developers.
The additional amount, compared with previously announced figures, means the total budget is seven times the amount obtained in last year’s tender, according to the government.
The move is aimed at reinvigorating investment in the UK’s clean energy industry after the previous government failed to win any new offshore wind contracts last year and failed to lift restrictions on onshore wind power.
The government said increasing the number of tenders would create good quality jobs in the UK’s industrial heartlands and coastal areas, and increase clean energy supplies to protect household bills from rising global fossil fuel markets.
Energy Secretary Ed Miliband said: “Last year’s bidding round was a disaster, delivering zero offshore wind power and slowing the transition from expensive fossil fuels to energy independence.”
“Instead, we are supporting the UK construction industry and funding this year’s auction with the largest ever funding, which will help the UK regain its position as a world leader in green technology, increase energy independence, protect ratepayers and provide the infrastructure it needs to become a clean energy powerhouse,” he added.
Offshore wind projects will compete this summer for up to £1.1 billion in funding, up from £800 million set by the previous government, which analysts at Jefferies say could front-load investment in 6-7 gigawatts of offshore wind capacity, enough to power almost 5 million homes.
Onshore wind and solar projects will compete for a £185 million allocation, an increase of £65 million on the previously announced figure. Ministers will also more than double the funding available for nascent clean energy technologies, such as floating offshore wind and tidal projects, to a total of £270 million.
Mr Miliband announced plans for the investment boom just weeks after Labour came to power with a pledge to double onshore wind, triple solar and quadruple offshore wind by 2030, and after senior party figures warned that Labour’s clean energy targets may already be in jeopardy.
“How close we get to the government’s 2030 offshore wind target will depend on what happens over the next 18 to 24 months,” said Damian Zachrod, managing director of the UK branch of German energy company EnBW, which is developing the offshore wind project with BP.
Keith Anderson, chief executive of Scottish Power, which is expected to compete for two offshore wind contracts in the auction, said: “The auctions needed a reset after last year and we welcome the increased budget. This is an important investment signal for the industry to make the UK a clean energy powerhouse, secure lower cost offshore wind power and drive economic growth.”
The contract guarantees new renewable energy projects a set price for each unit of clean electricity they generate, which is paid for through energy tariffs.
But the way the contracts are structured means that costs for consumers aren’t supposed to rise: if the price in the wholesale electricity market falls below the price agreed in the contract, households have to pay extra to make up the difference. But the cost of renewable energy is increasingly below the market price for electricity, meaning these contracts actually get money back to ratepayers.
The reset comes as new government data confirms that 2023 will be a record-breaking year for renewable energy generation. Official figures show that 46.4% of the UK’s electricity came from renewables last year, compared with 36.7% from fossil fuels.
Wind is the UK’s largest source of clean electricity, generating a record 28.1% of electricity in 2023, beating the previous record of 24.7% in 2022, the data showed.
The data showed offshore wind will generate a record 17% of UK electricity production, up from 13.8% in 2022, while onshore wind will generate a record 11.2%, up from 10.8% in 2022.
