The UK’s net-zero plan took another hit recently when no companies submitted bids for offshore wind development projects in 2023. This follows the country’s reversal on the phase out of internal combustion vehicles which was already seen as a weakening of the government’s commitment to its climate goals. Offshore wind is a big piece of the UK’s net-zero plan, with the UK government aiming to triple capacity in offshore generation by this year. The UK uses an auction system to distribute government subsidies to clean energy developers, and offshore wind developers are arguing that the amount of the subsidies is insufficient. The New York Times recently covered the failed auction stating that:
“With inflation soaring, the government’s efforts to use the scheme to drive down power prices for consumers have caused developers to back away. Vattenfall, a major developer, put a large planned project in the North Sea on hold this year, saying costs were rising as much as 40 percent.”
In addition to inflationary pressure, the article also mentions that the cost of steel and copper is on the rise. Steel and copper are core components in the development of offshore wind energy and are therefore driving the costs of development higher. High cost was also a factor in the decision on EVs.
Governments cannot rest on their laurels when it comes to net-zero planning. Just because a subsidy was sufficient five years ago doesn’t mean that same subsidy will work today. It also illustrates one of the key problems in bringing clean energy to scale in a short timeframe. As demand for clean energy rises, so does demand for the components to build that infrastructure. Without plans in place to control these costs, clean energy projects may hit bottlenecks where the costs of materials become prohibitive.
This is a reminder that a net-zero plan is a living document – whether for a nation or a company. Market pressures are ever-changing and sometimes plans will become unfeasible over time. In these cases, it is important to have a backup plan and know how to adapt quickly.
If you aren’t already, subscribe to our complimentary ESG blog here: https://practicalesg.com/subscribe/ for daily updates delivered right to you.
