Labour Aims to Secure Clean Energy Contracts with Historic £1.5bn Auction Budget

The Labour government is set to provide a record amount of funding for clean energy developers, increasing the value of its summer subsidy auction by 50% to £1.5bn. This budget is seven times larger than last year's allocation, aiming to revive the UK's clean energy sector after the previous government failed to secure any new offshore wind contracts in 2023 and did not lift restrictions on onshore wind.

The government stated that the expanded auction round would create high-quality jobs in the UK's industrial and coastal regions while protecting households from global fossil fuel price hikes by offering more clean energy alternatives.

Energy Secretary Ed Miliband commented, "Last year's auction round was disastrous, with no offshore wind projects secured, delaying our shift from costly fossil fuels to energy independence. This year, we are investing significantly to re-establish the UK as a global leader in green technologies, enhancing our energy independence, protecting bill payers, and transforming into a clean energy superpower."

This summer, offshore wind projects will vie for up to £1.1bn, an increase from the previous £800m. Analysts at Jefferies suggest this could lead to investments in 6-7 gigawatts of offshore wind capacity, sufficient to power nearly 5 million homes.

Onshore wind and solar projects will compete for £185m, up £65m from previous figures. Additionally, funding for emerging clean energy technologies like floating offshore wind and tidal power will more than double to £270m.

Miliband's investment strategy follows concerns from senior executives that Labour's clean energy targets might be at risk shortly after the party took power, promising to double onshore wind, triple solar power, and quadruple offshore wind by 2030. Damien Zachlod, managing director of EnBW's UK division, highlighted the importance of the next 18 to 24 months for meeting the 2030 offshore wind targets.

Keith Anderson, CEO of Scottish Power, expressed support for the increased budget, stating, "The auction needed a reset after last year. We welcome the increased budget, an essential investment signal to the industry to make Britain a clean energy superpower, secure more low-cost offshore wind, and spur economic growth."

The contracts guarantee new renewable energy projects a set price for each unit of clean electricity generated, funded by energy bills. However, these contracts are structured to avoid raising consumer costs. If market prices fall below the agreed contract price, households cover the difference. However, the falling cost of renewable energy often means these contracts return money to bill payers.

The budget increase was announced alongside new government data showing a record year for renewable energy generation in 2023. Official figures indicate renewables supplied 46.4% of the UK's electricity last year, compared to 36.7% from fossil fuels. Wind power was the largest source of clean energy, generating a record 28.1% of electricity in 2023, surpassing the previous record of 24.7% in 2022. Offshore wind accounted for 17% of electricity, up from 13.8% in 2022, while onshore wind provided 11.2%, an increase from 10.8% in 2022