On 7 March, the Department for Business, Energy and Industrial Strategy (BEIS) announced the Offshore Wind Sector Deal. It is the first of the UK’s Sector Deals to target a renewable energy technology. The Deal comprises £250m in investment from offshore wind developers in exchange for £557m in subsidies through to 2030. Offshore wind currently supplies 6.2% of the UK’s electricity, which could rise to 30% under the Deal. The Deal would triple employment in offshore wind (and improve gender diversity), increase the industry’s exports fivefold, and increase the UK content of wind turbines to 60%. The Deal could singlehandedly result in renewable energy surpassing fossil fuels in the UK’s electricity mix for the first time.
The Deal functions using existing legislation. Subsidies are to be provided through the Contracts for Difference (CfD) scheme. Its market-based auction mechanism allows the cheapest renewable energy technologies to be subsidised. Costs are passed onto consumer electricity bills. The current upward trend in wholesale electricity prices is pressuring cheaply procured renewable energy through CfD. However, this competitive pressure on the offshore wind industry might be unsustainable. The upcoming CfD auctioining period has only had £60m allocated to it, which might procure 1-2GW of offshore capacity. This is well below the 17% annual growth rates in capacity that the Deal claims is achievable. Furthermore, there are workers’ rights concerns in offshore wind. Migrant workers in the UK have been found to be paid below minimum wage, and workplace accidents in offshore wind are four times higher than they are for the offshore oil and gas industry, according to Sue Ferns of Prospect. Lastly, while Sector Deals are intended by BEIS to cement the UK’s economy as a globally innovative one, the International Energy Agency shows that UK funding for offshore wind research has fallen 53% in real terms since 2010.
The Offshore Wind Sector Deal presents attention-grabbing headlines that suggest ambition on the level needed for energy transitions. However, there remain legitimate concerns over the state of the offshore wind industry at present. BEIS’s ambition may be misaligned with its funding commitment, questioning the ability of the industry to realise its potential.
Nick Fedson MEng MSc
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