Report by energy research firm BNEF comes as rising costs and poor returns hamper Labour pledge on clean energy
The UK is likely to fall significantly short of its five-year target for offshore wind power, as developers continue to delay or cancel projects because of rising costs and poor returns, according to a new analysis.
Sir Keir Starmer’s Labour government has made clean energy one of its key goals and said in December that it wanted at least 43 gigawatts of offshore wind generation to be built by 2030.
But a report by energy research firm BNEF predicts that only 33GW will be in operation by then, and said there would be a “few years” of delays to achieving the goal.
“It is hard to build major offshore wind projects. There are not even enough vessels,” said Arhnue Tan, one of the researchers behind the report.
Developers are increasingly concerned about the viability of offshore wind projects, with potential returns squeezed by elevated financing costs, supply chain problems and expectations of a fall in long-term power prices.
The world’s largest offshore wind developer, Ørsted, earlier this month halted work on one of the biggest projects in the North Sea, a 2.5 gigawatt farm called Hornsea 4 that would have powered more than a million homes.
Hornsea 4 won a contract from the government last year guaranteeing it a fixed electricity price of £58.87 per megawatt hour, but Ørsted said it could not make the economics work.
Last week SSE, the FTSE 100-listed energy company, said it would slow down its investment in Berwick Bank, a project to build the world’s largest offshore wind farm in the outer Firth of Forth, and in the second phase of Arklow Bank in the Irish Sea.
SSE blamed bottlenecks in the planning system for the decision to cut its investment. Chief executive Alistair Phillips-Davies told the FT that Berwick Bank, which could power as many as six million homes, “has been on ministers’ desks for about three years now”.
While there are 16.6GW of offshore wind projects currently in the pipeline, current market conditions suggest that only a fraction of them will go ahead, and there could also be more cancellations of existing projects, according to BNEF.
A key moment for the industry will come this summer, as the government launches the seventh allocation round for offshore wind, where subsidies for projects will be awarded.
Despite the challenges in offshore wind, BNEF said the UK was on track to easily meet its 47-50GW target for solar power.
Tan added it would still be possible to hit the overall goal of only 5 per cent of electricity generated by gas by 2030, despite the predicted shortfall in additional wind turbines, if there was “reasonably windy weather”.
A spokesperson for the Department of Energy Security and Net Zero said the government “categorically rejects these claims”.
“We have a strong pipeline of projects to deliver 43-50GW offshore wind by 2030 and our mission-led approach ensures we can steer our way through global pressures and individual commercial decisions to reach our targets,” they added.
