Plans for a series of new offshore wind farms have been thrown into doubt after the Government disclosed it would only award enough subsidies this autumn to fund one such project.
Wind farm developers who fail to secure a subsidy contract this year will be forced to wait and attempt to secure funding in future years, with no guarantee of how much money – if any – will be available.
The disclosure underlines a growing realisation in the industry that the finite budget for green subsidies is now on the verge of exhaustion and there is simply not enough cash left for many projects now in the pipeline to be built this decade.
The Treasury has said the cost to consumers of green subsidies must rise to no more than £7.6bn in the 2020-21 financial year. The vast majority of that will be used up by subsidies for projects that have either already been built, are under construction, or have already been awarded a subsidy contract.
Ministers said on Thursday that they would allocate new contracts for projects requiring up to £205m in annual subsidies this autumn, of which £155m is earmarked for technologies such as offshore wind.
Gordon Edge, director of policy at Renewable UK, said this sum would fund just one typical 500 megawatt offshore wind farm “which is significantly less than we need”.
There are five offshore wind farms with planning consent that are likely to want to secure a contract, plus a further six projects which are still in the planning system.
One of the projects with consent is ScottishPower’s East Anglia proposal, which has capacity of 1.2GW and therefore appears unable to secure full funding for the entire project this year.
Until now, offshore wind farms have been subsidised through a scheme called the Renewables Obligation (RO), but this will be closed to projects built after April 2017.
The long construction time means the window is now rapidly closing for offshore farms not already being built to qualify for the RO, leaving the new contracts as the main option.
But the National Audit Office warned last month that only £600m from the 2020-21 budget was left to be allocated for the new system of subsidy contracts to cover all large-scale renewables such as offshore wind, onshore wind and solar farms.
The energy department said on Thursday it still had “around £1bn potentially available” for further projects up to 2020-21 but did not specify when this would be allocated, beyond £50m next year.
The budget post-2020 is yet to be set but at a minimum will have to expand to accommodate new nuclear plants, the first of which could start generating power – and therefore using up susbidies – from around 2024.