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The UK’s failure to attract offshore wind developers in its latest renewable energy auction must be a “wake-up call” for the country, the head of one of the world’s biggest renewable energy companies has warned.
Markus Krebber, chief executive of RWE, said “the entire industry” had been vocal about what it saw as the insufficient support offered for offshore wind by UK authorities in an annual round of contracts for new projects. The round generated no bids for new offshore wind contracts.
“I think the current framework has not recognised the higher inflation environment,” Krebber told the Financial Times, adding his voice to similar complaints from across the sector.
RWE generates more electricity than any other company in Germany, having produced a quarter of all power sold in the country in 2021, the last full year for which figures are available.
Krebber, whose company has one of the largest pipelines of offshore projects under construction in the UK, said RWE was among the developers that decided against bidding for offshore sites during the round. The company nevertheless won a string of contracts for onshore wind and solar projects.
“Hopefully this is now a wake-up call for necessary adjustments and the framework will be reconsidered,” Krebber said. “It is, of course, concerning because the UK climate targets cannot be achieved without offshore wind.”
The lack of interest struck a blow to the UK’s aim of more than tripling its offshore wind capacity to 50 gigawatts by the end of the decade — a central plank of a drive to meet its target of net zero carbon emissions by 2050.
Krebber expressed bemusement at the UK’s strategy, drawing a contrast with its support for nuclear energy.
“I struggle to see [why there is] a support scheme, for example, for new nuclear power at much, much higher pounds per megawatt hour than offshore wind,” Krebber said. “Offshore wind, if it is supported in the right way, is built in time. And, when you follow the news on nuclear, it is totally unclear when and at what price it will come.”
The UK government has responded to criticism by highlighting the success in this year’s auction of onshore wind and solar, with a total 3.7GW of onshore wind, solar, tidal and geothermal generation awarded contracts.
The RWE chief said clear long-term direction from governments in fields such as offshore wind was crucial to ensuring Europe could meet its ambitious targets for reaching carbon neutrality.
Krebber also voiced concern about the pace of change in upgrading and adapting the continent’s energy grid. Substantial extra capacity is needed to handle the changes in supply and demand that will come from phasing out fossil fuel power generation and electrifying huge swaths of transport and industry.
“I hear it across all European countries that currently the bottleneck has shifted from planning and permitting to grid connection,” Krebber said.
However, he pointed to the German government as an example of good practice in offshore wind planning, with clear targets for future capacity and auctions held well in advance of those dates. The practice gave “clarity and confidence” about the grid, he said.
Krebber added that his other big concern was the supply chain for renewable energy, with manufacturers already under stress amid higher costs, tighter financing conditions, heavy demand and competition from China.
He said he was especially worried about the longer-term outlook, pointing to the lack of manufacturing capacity for batteries, solar panels, transformers, cables and installation vessels.
“If you . . . simply add up the buildout targets for renewables in Europe and also in the US, and you compare that to the manufacturing capacity . . . you realise that the current supply chain cannot deliver the buildout targets,” Krebber said.
“Massive investments and ramp-up of capacity” were needed, he added.
Krebber said as with grid expansion, clearer forward planning would be an important step towards easing the pressure on suppliers and expanding capacity.
“We still have enough time to fix the problem, but we have to start now,” he said. “If we now discuss planning and permitting only, then we will wake up in three years and say, ‘OK, this all solved, but now we face the next wave of bottlenecks’.”
Additional reporting by Rachel Millard in London