Clean energy funding boosted with £1.5b renewable auction budget

The government has announced a significant increase in funding for its next renewable energy auction, setting a record-breaking budget of over £1.5 billion. This marks a more than 50% boost from the previous auction budget, signaling the government’s commitment to accelerating the country’s transition to clean energy.

The lion’s share of the funding, £1.1 billion, will be allocated to offshore wind projects, which are seen as the backbone of the UK’s clean energy strategy. The remaining funds will be split between established technologies like onshore wind and solar (£185 million), as well as emerging technologies such as floating offshore wind and tidal power (£270 million).

The increased budget is part of the government’s broader mission to make the UK a “clean energy superpower” and enhance the country’s energy security. By investing in renewable projects, the government aims to provide families and businesses with access to cheap, clean electricity, reducing their vulnerability to volatile global fossil fuel markets.

Energy Secretary Ed Miliband says:

“Last year’s auction round was a catastrophe, with zero offshore wind secured, and delaying our move away from expensive fossil fuels to energy independence. Instead, we are backing industry to build in Britain, with this year’s auction getting its biggest budget yet. This will restore the UK as a global leader for green technologies and deliver the infrastructure we need to boost our energy independence, protect billpayers, and become a clean energy superpower.”

Industry will now bid for a share of the funding through the government’s sixth renewable auction – known as the Contracts for Difference scheme – which provides developers with initial subsidies for clean electricity projects across Britain with a built-in design to keep costs low for billpayers.

These subsidies are paid back when wholesale electricity prices are higher than the agreed Contract for Difference price. This was seen over Winter 2022/2023, when Contracts for Difference payments reduced the amount needed to fund government energy support schemes by around £18 per typical household.

The scheme’s design means the central government’s budget will not be impacted, following findings from a Treasury spending audit that revealed £22 billion of unfunded pledges inherited from the previous government.

Last week the government launched Great British Energy in partnership with the Crown Estate, backed by £8.3 billion of new money, which is estimated to create up to 20-30GW of new offshore wind developments reaching seabed lease stage by 2030.

The budget increase for Contracts for Difference marks the latest milestone in the government’s clean energy superpower mission, building on the lifting of the onshore wind ban and the approval of major solar farms powering the equivalent of almost 400,000 homes.

Now the budget has been set, the auction will take place in August with successful projects to be announced in September 2024.