With less than six years to go, the new Energy Secretary, Ed Miliband MP, will need to hit the ground running if the Party is to deliver on its key aim of clean power by 2030. In this article, Brevia Energy looks at one immediate decision that a Labour Government can take to turn ambition into action.
Assessing Labour’s commitments
Miliband has vowed that he will be guided by the ‘North Star’ of clean power by 2030.[1] However, many of Labour’s manifesto pledges, such as establishing Great British Energy or getting Hinkley Point C over the line, won’t yield immediate progress or deliver new capacity quickly. One of the first opportunities that Labour will have to demonstrate intent on delivering its 2030 target will be increasing the budget for Allocation Round 6 (AR6) of the Contracts for Difference (CfD) auction.
Greater ambition for AR6
The previous Government set a budget of £1.025bn for AR6. This is divided across three pots:
- Pot 1: Established Technologies – £120 million
- Pot 2: Emerging Technologies – £105 million
- Pot 3: Offshore Wind – £800 million
Whilst this is the largest budget ever set, industry has argued it will not deliver the previous Government’s target of 50 GW of offshore wind capacity by 2030, not least Labour’s more ambitious target of 55 GW by 2030.[2] As of June 2024, there is 14.7 GW of installed capacity and roughly 14 GW of capacity that has secured a Final Investment Decision, has been awarded a CfD contract, or is under construction.[3] To deliver on the 50 GW target, AR6 and AR7 will need to award over 10 GW of offshore wind in each round. Analysis by Energy UK suggests that AR6 will deliver just 3-5 GW of offshore wind capacity based on the existing budget and assuming a strike price of £55-70/MWh.[4]
There is still time to increase the AR6 budget. Should he wish to make early progress on Labour’s 2030 targets, the Energy Secretary will have between 26 July and the 1 August, before the sealed bid window opens, to decide whether the budget will be increased. There is a precedent for increasing CfD budgets during this period. The last Government increased the budget for AR5 from £205 million to £227 million.[5] Despite this increase, there were no successful offshore wind bids. This was primarily due to issues around the Administrative Strike Prices (ASP), which the previous Government have already significantly increased by 66 per cent for offshore wind and 53 per cent for floating offshore wind.[6] It is important to note however that, during this period, Government can only increase pot budgets and not the ASP.
A small window of opportunity
The deadline for increasing the AR6 budget is fast approaching. Industry needs to emphasise the need for bold action and clear direction to deliver on Labour’s 2030 mission. Increasing the AR6 budget will be a key first step and indicator of whether Labour is prepared to turn its ambition into action.
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Notes
[1] Labour List, ‘“Consistent and clear climate leadership” – Miliband’s speech to the Green Alliance’, 28 March 2023, Link
[2] Energy UK, ‘Energy UK explains: Allocation Round 6 and the UK’s energy security goals’, 22 February 2024, Link
[3] Department for Energy Security and Net Zero, ‘Renewable electricity capacity and generation (ET 6.1 – quarterly) – Energy Trends: UK renewables’, 27 June 2024, Link ; Energy UK, ‘Energy UK explains: Allocation Round 6 and the UK’s energy security goals’, 22 February 2024, Link
[4] Energy UK, ‘Energy UK explains: how much renewable energy can we expect from Allocation Round 6?’, 6 March 2024, Link
[5] Department for Energy Security and Net Zero, ‘Contracts for Difference (CfD): Budget Revision Notice for the fifth Allocation Round’, 3 August 2024, Link
[6] Department for Energy Security and Net Zero, ‘Boost for offshore wind as government raises maximum prices in renewable energy auction’, 16 November 2023, Link
