top of page

The Chancellor can rebuild confidence in the UK's offshore wind market in his Autumn Statement

The Chancellor should grasp the opportunity to enact measures that can maximise investment in offshore wind, writes RenewableUK's Ana Musat.

Ever since the disappointment of this year’s CfD auction, which attracted no offshore wind bids, we have been talking to the Government about the measures which need to be taken as a matter of urgency to ensure that next year’s auction succeeds in securing a bumper amount of new clean energy capacity, to make up for what was lost this year and to accelerate deployment to meet the Government’s target of 50GW of offshore wind by 2030. This discussion is particularly pertinent this week, as the EU is set to double down on attracting investment into the sector by streamlining the route to market and infrastructure buildout with its Wind Power Package.

Meeting our 50GW target by 2030 is fundamental for delivering lower bills, improving our energy security and reducing dependence on volatile gas and creating a thriving industrial ecosystem which will deliver over 100,000 jobs throughout the country and local regeneration. To achieve it, we need to pull out all the stops to rebuild investor confidence in the UK’s offshore wind market, so that we can attract £17 billion in private investment every year between now and 2030.

We have much catching up to do. Although we were pleased that some onshore wind, solar and tidal stream projects bid into the auction, overall only 3.7GW of new renewable capacity got through - the lowest level since 2017 and just over a third of the 10.8GW in last year’s auction. To get back on target, we will need to secure between 4.5 and 5.8GW of new offshore wind alone every year between now and the end of the decade. 5.5GW of offshore wind was eligible to bid this summer - we cannot risk this vital new capacity slipping through our fingers again.

This is why RenewableUK has just sent a letter to the Chancellor Jeremy Hunt outlining four crucial measures which he could choose to announce in his Autumn Statement on 22nd November to help the UK to regain its position as the most attractive place to invest in offshore wind.

Firstly, we are calling for a commitment by the Chancellor to maximise investment in offshore wind in next year’s CfD auction by working with the Department for Energy Security and Net Zero to set an overall budget, and maximum strike prices, at appropriate and sustainable levels. In this year’s auction, the Government set a cap on prices would not have allowed a return on investment for offshore wind developers. Some companies have warned that the costs of building new projects have increased by up to 40% over the past year, with steep rises in the costs of capital, labour and supply chain goods and services.

Secondly, we are urging Mr Hunt to change the rules on capital allowances, or tax breaks, so that offshore wind projects can qualify for the main allowance rate of 18%, rather than the lower “special” rate of only 6% which developers get at present. An extension of the 3-year changes to capital allowances announced in the Spring Budget will also be important for creating the long-term certainty that is essential to mobilise investment.

We are also asking the Chancellor to remove the Electricity Generator Levy from offshore wind projects which choose to sell their power directly on the open market for a limited time before taking up their CfD. This “merchant nose” option is vital for projects to break even. The levy is disproportionately impacting projects which have not been making excess profits - the fact that some projects in the last two annual auctions have yet to reach the point of Financial Investment Decision provides clear evidence of the case for making this change.

Fourthly, we are calling for measures to attract further investment in the offshore wind supply chain and port infrastructure. Growing the supply chain offers an opportunity to boost the UK’s economy by £92 billion by 2040. Up to 11 ports around the UK will need to be transformed as fast as possible into new industrial hubs to enable the roll-out of floating offshore wind at scale, which will require up to £4bn of private and public investment. Every £1 invested in UK ports would generate up to £4.30 of added value to our economy.

RenewableUK and the offshore wind industry are working with the Government to formulate and fund an Industrial Growth Plan, looking at the UK’s unique value proposition for developing offshore wind supply chains to service our domestic market as well as export our high-value goods and services worldwide, playing on our areas of competitive advantage. The Chancellor could signal his support for this industrial development in his Autumn Statement.

Mr Hunt has a clear choice - he can either help us to double down on the economic opportunity offered by offshore wind and other clean technologies, or risk surrendering our position as a global leader. If the UK is not offering conditions which allow investors to make a return, they will simply go elsewhere. 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 by setting out investable parameters. The Autumn Statement provides a perfect opportunity for the Chancellor to underline his support for this.

By Ana Musat, Executive Director for Policy and Engagement, RenewableUK



bottom of page