The UK wind industry is urging the government to act quickly and implement some key market, regulatory and policy reforms, warning the current market set up – notably the contracts for difference (CfD) support framework – may not be enough to deliver the investment required or the volume of wind projects needed to fully decarbonise by 2035.
Outlining its own recommendations, the “Roadmap to net zero: a manifesto for a fully decarbonised power system by 2035”, by RenewableUK, suggests overhauling the current market framework could instead attract up to £175 billion in onshore and offshore wind investment to 2030, helping to reduce consumer bills and the UK's reliance on gas and global energy markets.
In its manifesto, RenewableUK focuses on six core areas to address the range of strategic barriers to delivering the necessary infrastructure to achieve the UK's goals.
Pathway to a zero-emission power system
While welcoming the target to quadruple offshore wind capacity to 50GW by 2030, RenewableUK says onshore wind also needs to double to 30GW for the UK to achieve its targets for 95% low carbon electricity by 2030 and a fully decarbonised power system by 2035. Embedding flexibility across the energy system, not just in power generation, will also bring additional benefits, it says.
A series of strategic barriers to deployment – ranging from reform of the current planning process, to changes in the way energy networks are regulated – need to be tackled. Some actions are underway, including accelerated consenting for offshore wind and the offshore transmission network review, but RenewableUK warns more needs to be done.
RenewableUK calls for the process for developing new offshore wind sites needs to be streamlined, while a policy and regulatory framework for supporting the repowering of existing renewable sites should be developed. Longer term, the organisation says would like to see an overarching "2035 plan" for addressing the strategic barriers to deploying the necessary low-carbon capacity, such as cross-cutting permitting issues and network delivery challenges.
Reforming markets — CfD evolution
The manifesto's key recommendation is the "evolution" of the CfD mechanism.
According to the report, the CfD framework remains the best route to deliver the generation volumes required out to 2035, but reform is clearly needed to accelerate deployment and build greater resilience into the system”.
It notes that global demand for offshore wind is increasing competition for investment and putting pressure on supply chains, warning that, combined with maturing technology, the trend of ever cheaper prices may be at an end.
The not-for-profit association argues that a revamp of the CfD mechanism would incentivise long-term capital investment in major projects, build up supply chains and continue to provide consumers with clean energy at low and stable prices.
"Careful consideration will need to be given to CfD reform, perhaps entailing a shift to a greater focus on payment based on availability to link the mechanism more directly with the capacity market and sharpen incentives for generators to respond to short-term market signals," it says.
It adds: "Competition must remain a central pillar of any CfD reform to ensure that consumers are benefitting from lowest cost energy."
Creating a net zero network
The organisation calls for UK regulator Ofgem to be given a legal duty to deliver the net zero target and says fundamental reform of the way network infrastructure is designed, planned and delivered is required.
"This will include coordinating onshore and offshore transmission in order to minimise the localised impacts of new infrastructure of developing major pieces of network infrastructure in already constrained areas, as we have seen on the east coast of England," it notes.
The offshore transmission network review should also be used to prioritise early opportunities to coordinate investment in network assets for projects that can deliver ahead of the UK’s original 40GW by 2030 target and establish a long-term solution for planning integrated offshore grid infrastructure post-2030.
Accelerating renewable deployment
The permitting process is another key area of concern. "Given the scale of the current planning challenges facing companies, there is a real risk that this undermines the UK’s reputation as the pre-eminent location for international investment," warns the manifesto.
Measures announced in the UK energy security strategy to accelerate the current consenting process for offshore wind are a welcome step forward, but "we should be more ambitious and imaginative", it says.
Options for a centralised regulatory authority to streamline offshore wind development should be investigated, it says, while a centralised regulator could "significantly accelerate the process and allow us to strategically develop habitat solutions and environmental protections”.
The UK government should also lead the development of a comprehensive strategic plan for the marine environment that outlines how trade-offs will be made across different seabed users.
Onshore, government should also design the new onshore communities scheme in a way that enables maximum deployment in parts of England where there is local support.
Wind power will play a key role in achieving the UK's target of at least 5GW of green hydrogen by 2030. The government is currently working on a hydrogen business model, but in the meantime RenewableUK says it should bring forward a suite of measures to stimulate demand. These should include phasing out grey hydrogen production, implementing hydrogen obligations for industrial users and measures to create a level playing field in fuel for heavy transport. Additionally, electrolysers should be exempted from levies to reduce distortions and provide clarity to the market.
Maximising the economic opportunity
The role of the wind industry in stimulating skilled jobs and investment is also explored.
The Offshore Wind Industry Council highlights that by 2030 the sector can support nearly 100,000 jobs and unlock over £150 billion of private investment. In onshore wind, meeting the industry's ambition of 30GW by 2030 will create 27,000 high quality jobs and add £45 billion to the UK economy.
The UK should build on the regulatory and market reforms RenewableUK recommends by adding a "comprehensive package of tax, development, R&D and skills incentives that provide the wrap-around support for investment that can deliver the step-change that government and industry want to see in this space".
Notably, the manifesto calls for the creation of new offshore wind enterprise zones. "The fierce competition for freeport and green port status shows how powerful these kinds of incentives can be in driving investment,” it says.
The manifesto also calls for a formal review of how the education and skills framework from secondary and further education onwards can support the net zero transition, including the development of highly-skilled green jobs.
‘Reform the CfD’
RenewableUK’s CEO Dan McGrail said: “Speed and scale are key: we must revolutionise the rate at which we build new projects onshore and offshore."
"We need to transform the way we plan and regulate our energy system, to make the UK the best place to invest in by reforming the CfD mechanism,” he added.