In an effort to attract investment from energy firms, the UK government is planning to raise the price paid for generating electricity from offshore wind farms by more than 50%.

This decision comes after a recent auction for offshore wind projects failed to receive any bids, with companies citing the initially set electricity price as too low.

The current price of £44 per MWh is expected to be increased to as much as £70 per MWh, according to information obtained by the BBC. The government hopes that incentivizing higher investment in offshore wind capacity will ultimately lead to reduced energy bills for consumers.

Energy companies have conveyed to the BBC that electricity generated offshore remains a more cost-effective and stable option compared to power derived from gas-fired power stations.

Despite being a global leader in offshore wind, hosting the world's four largest farms, and contributing 13.8% of the UK's electricity generation last year, the sector faced setbacks when the September auction for project contracts saw no bids. Plans to almost quadruple offshore wind capacity from 13 GW to 50 GW by 2030, capable of powering every UK home, were seriously compromised.

The challenges stem from increased costs for building offshore farms, with higher expenses for materials like steel and labor. Industry sources report that the government's failure to acknowledge these cost implications led some companies to abandon ongoing projects, resulting in a widespread boycott of the recent auction.

To bridge the gap and meet its 2030 target, the government aims to attract bids for six to eight GW of power annually for the next five years. However, the expansion faces obstacles in the form of the necessary infrastructure to transport offshore-produced power back to the mainland. The solution involves constructing hundreds of miles of pylons and underground cables, potentially crossing privately-owned land.

Chancellor Jeremy Hunt is expected to address this issue in his Autumn Statement, possibly reclassifying such connections as critical national infrastructure and exploring ways to compensate affected communities, including farmers, through discounts on energy bills. Industry insiders describe this as a "combination of stick and carrot," emphasizing the need to overcome challenges posed by small, wealthy communities hindering energy development for larger, economically disadvantaged communities.

These measures will be part of a broader government response to an energy review conducted by the UK's electricity networks commissioner, Nick Winser, which presented recommendations to expedite the connection of new power sources to the National Grid. The urgency was highlighted when ministers learned that under current rules, a planned battery plant in Somerset might face a connection delay of over a decade to the electricity network. Photo by Rob Farrow, Wikimedia commons.