The fourth round of the UK government’s Contracts for Difference (CfD) auction scheme, designed to boost investment in low-carbon energy, has begun and aims to support 12GW of new generation capacity.
It will provide £285m annually in support for low-carbon energy production, which the Department for Business, Energy and Industrial Strategy (BEIS) says is the largest package under the scheme to date.
The competitive nature of the CFD scheme has driven renewable energy deployment across the UK with great success while rapidly reducing costs. The design of the program has resulted in the price per offshore wind unit falling by around 65% between the first allocation round (AR) in 2015 and the third in 2019.
Most of the funding is made available for offshore wind. This is vital if the UK is to meet its pledge for 40GW of offshore wind by 2030.
The UK pioneered offshore wind energy for more than two decades and is now a world leader, and our skills are in demand around the world. However, this comes at a crucial time as the goal is to go from the current 12GW of offshore wind generation to 40GW by 2030. A bold goal considering it took 20 years to reach the current 12 GW!
To achieve this goal, the government must commit to increasing the frequency of CFDs to ensure a pipeline of projects, secure jobs and investment in local content.
It will also require critical policy, permitting and transmission reforms, as well as significant manufacturing and construction efforts, at a time when other countries around the world are ramping up their offshore wind activities and competing for resources.
The opening of the fourth CfD round comes shortly after BEIS granted Vattenfall planning permission for its 1.8GW Norfolk Boreas wind farm. Siemens Energy and our partner Aker Solutions are the preferred bidder for the development of the grid connection infrastructure with high-voltage direct current (HVDC) technology.
HVDC is the most efficient way of transporting large amounts of electricity over long distances to connect to land grids and this appointment will provide an opportunity for the local supply chain to get involved to explore the tremendous opportunities that will lie at one of the largest offshore zones of the world.
Siemens Energy is the world market leader in connecting offshore wind energy to the grid. With our state-of-the-art offshore transformer module (OTM) technology, we continue to innovate and find ways to reduce costs for developers worldwide while meeting the energy needs of the future.
Indeed, we have a strong track record of local projects that have helped connect the north of Scotland’s rapidly growing renewable energy generation to the national grid and have spent around £200m with local suppliers for renewable and transmission projects over the last five years issued.
Development approval in the last CfD round was also approved for Moray West. The offshore wind farm in the outer Moray Firth has selected the Siemens Energy/lemants consortium to supply the project’s two offshore substation platforms and Siemens Energy will also supply the onshore substation which will replicate the work we are doing at Moray East completed.
But what we’re really proud of here is that, with our partner Iemants, we will be bringing the assembly and fitout of the OTM back to the North East to help take the project towards the 60% local UK content outlined in the Sector agreement for offshore wind energy.
Ensuring local content is something we are passionate about. We are also working with clients in Scotland on the Scotwind round of seabed leasing in Scottish waters for the next commercial offshore wind developments.
These future projects in Scotland will take offshore wind energy to the next level and explore how hydrogen electrolysers could be embedded into the projects to produce green hydrogen.
These significant investments are a prime example of how the UK’s transition to a low-carbon economy can attract new industries, create jobs, reduce our dependence on fossil fuels and create export opportunities to emerge from the pandemic in a greener way.
As the UK continues to build a secure domestic renewable energy sector and reduces its dependence on fossil fuels and volatility in global wholesale energy prices, the capacity to harness clean, domestic offshore wind energy to power the country will accelerate over the next decade .
The UK has a major advantage in achieving this goal. We have the best resources and possibly one of the best regions in the world for offshore wind – we are an island country and we have the North Sea which is flat and has high wind speeds.
The UK has rebuilt the offshore wind power industry from the ground up. In the early days of offshore wind energy, our biggest challenges were to prove the concept and reduce costs. This technology is now established – offshore wind power is already the leading source of renewable energy in the UK and our skills are in demand around the world. In twenty years the UK offshore wind industry has grown from two relatively small turbines off the coast of Blyth to over 2,200 turbines scattered along the UK continental shelf.
This is an exciting and important moment for offshore wind energy in the UK and we are delighted to be part of the journey to decarbonise the world. We should be proud of these achievements, but much remains to be done.
Steve Scrimshaw is CEO of Siemens Energy UK & Ireland