An opportunity to wipe £1bn off people’s future household bills was missed by the government in failing to secure new offshore wind farms, an energy boss has told Sky News.
Keith Anderson, the chief executive of ScottishPower, which is one of the key builders of wind power in the UK, said it was “a mistake” and ministers had misread the market.
He has now called for “a big, bold” shift by the government to restore confidence and get back on track the industry, which is critical to meeting the UK’s climate change targets.
Mr Anderson made his comments after the government’s green energy plans were dealt a blow after firms snubbed an auction for contracts to run new offshore wind sites.
There were successful bids for onshore wind, solar, tidal and geothermal projects to supply the grid with electricity.
However, there were none for offshore turbines, which provide the backbone of the UK’s renewables system.
It was warned the process had struggled to attract bidders because the government has set the maximum price generators can receive as too low, failing to reflect the rising costs of manufacturing and installing turbines.
The industry has been hit by inflation that has seen the price of steel rise by 40%, supply chain pressures and increases in the cost of financing.
This year offshore wind producers were allowed a maximum bid of £44 per megawatt hour (MWh) of electricity, compared to £155 per MWh in 2015, based on adjusted figures.
The outcome of the auction is a setback to ministers’ pledge to deliver 50 gigawatts (GW) of offshore wind by 2030, from 14 GW currently.
Speaking to Business Live With Ian King, Mr Anderson said: “I’d say this is a mistake.
“There’s a big opportunity that’s been missed.
“The 5GW of projects that could have gone through this auction would have taken about £1bn off the cost of energy for customers in the UK.
“On the upside we have another auction coming up next year, so there’s a real opportunity for government to get the industry back up and running and get us back on track to hit those all important (climate) targets.”
Government ‘misread’ market
He added: “I think that there’s always been from the government’s point of view, a real desire to make sure they’re getting the most efficient price constantly out the auction mechanism and that’s understandable because it goes through to consumers bills.
“But I think the government misread how quickly the market was moving and how much prices were changing and how significantly they were changing and think they locked themselves into a mechanism and a process that didn’t give them the flexibility to move.
“The critical thing now is that the next auction has to be big enough and bold enough to get the targets back on track, to get investors back on track, to get the supply chain back on track and For us to drive down the price of energy for customers.”
Mr Anderson warned: “Without more renewables coming on the system, we remain reliant on fossil fuels and on gas.
“It exposes us to the volatility we’ve seen in those prices and that price then feeds through to customers, it exposes us to issues about energy security.
“The faster we invest in renewables and the more we invest in renewables, the more the secure system becomes, the less volatile the system becomes and the cheaper the system becomes.
“This is the best answer for everything. It’s the best answer for security, the best answer for the environment and the best answer for price.”
Energy and climate change minister Graham Stuart said: “Offshore wind is central to our ambitions to decarbonise our electricity supply and our ambition to build 50GW of offshore wind capacity by 2030, including up to 5GW of floating wind, remains firm.
“The UK installed 300 new turbines last year and we will work with industry to make sure we retain our global leadership in this vital technology.”
With offshore wind turbines now producing electricity much cheaper than gas power plants, experts have warned the failure to expand the sector threatens higher bills, undermines the country’s energy security and risks the UK’s position as a world leader in the industry.
Labour’s Ed Miliband branded the outcome of the auction an “energy security disaster” that would push up household bills.
The shadow energy security secretary said: “The Conservatives have now trashed the industry that was meant to be the crown jewels of the British energy system, blocking the cheap, clean, homegrown power we need.
“Ministers were warned time and again that this would happen, but they did not listen.”
Sue Ferns of the Propsect union said: “Businesses and workers stand ready to deliver a rapid rollout of renewables but the government’s failure to set sustainable prices is holding the industry back.”
Greenpeace UK’s policy director, Doug Parr, said: “This monumental failure is the biggest disaster for clean energy in almost a decade.”