London — Every home in the UK -- Europe's third-largest economy -- will be powered by electricity from offshore wind farms within a decade, UK Prime Minister Boris Johnson said in a speech to the Conservative Party conference Oct. 6.
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Johnson said the government would raise its target for offshore wind capacity by 2030 from 30 GW to 40 GW, providing funding of GBP160 million ($207 million) for offshore wind ports like Teesside and Humberside.
The announcement will fuel debate on the viability of the government's targets and the long-term implications for pricing. The UK government is due to publish an energy white paper alongside a heat and buildings strategy this autumn.
The following are key facts around energy policy in the UK.
Offshore wind has become more competitive in the UK power sector with the cost of installation falling in successive auctions.
- In the UK's third CFD auction round last year, 2.6 GW of offshore wind capacity were awarded at GBP39.65/MWh for delivery in 2023/2024, and a further 2.85 GW at GBP41.611/MWh for delivery in 2024/2025. The prices were 2012 real prices, so in fact the lowest bid was nearer GBP46/MWh in today's prices.
- The results represented a 31% reduction on the UK's previous cheapest strike price for offshore wind of GBP57.50/MWh, awarded in March 2017.
- Assessed by Platts at Eur51.46/MWh Oct. 5, UK baseload power for 2021 remains Europe's premium year-ahead power contract due to the government's higher carbon price support.
- In its latest forecast, S&P Global Platts Analytics sees UK baseload prices (real 2019) averaging GBP45/MWh for 2023 before easing to GBP37/MWh for 2025.
Platts Analytics forecasts UK demand to recover from COVID-19 losses by 2022, supported by electrification of transport. Forecasts for total UK demand in 2030 range from 300 TWh up to 322 TWh.
- The UK sector is targeting a fivefold increase in offshore wind-related exports to GBP2.6 billion per year as its supply chain grows in size and expertise.
- UK cross-border capacity is forecast to increase sharply by 2025, with links to Norway, Denmark and, less certain, Germany.
- Interconnector capacity to France is set to double to 4 GW by end-2021, making French nuclear generation, and its increasing sensitivity to price, a key risk to imports. Platts Analytics sees a steep reduction in net imports to the UK, from 3.6 GW in 2021 to 0.7 GW in 2025, as the UK exports more power to the continent at times of surplus wind generation.
The 40 GW target is not new – the government had confirmed the target in December 2019 – but it is hugely ambitious.
- The UK Crown Estate is currently offering over 7 GW of fresh seabed rights for development in a fourth round of leasing and has just offered leases for the extension of existing offshore wind farms totaling another 2.8 GW. Combined with the existing portfolio of projects already in operation, construction and planning, these actions take the UK pipeline to in excess of 40 GW.
- The UK has 10.3 GW of offshore wind capacity. The sector provided around 10% (32 TWh) of total UK electricity demand in 2019.
- The 40 GW of offshore wind would produce around 175 TWh/year, assuming a 50% load factor. This is more than current UK residential demand of 104 TWh/year, and over 50% of all UK demand.
- The UK generation mix will still contain gas and nuclear power in 2030. National Grid's future energy scenarios show fossil fuel generation ranging between 17 TWh and 43 TWh by then, while nuclear ranges between 32 TWh and 50 TWh.