Offshore wind power warning as government auction flops

Published

2 years ago

September 7, 2023

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Energy industry leaders have warned the UK could fall behind a key target for new offshore wind power ahead of the results of a government auction that is widely expected to flop.

Multiple industry sources have told Sky News the auction, the results of which are expected to be announced on Friday, has received little or no interest.

Insiders say the process has struggled to attract bidders because the government has set the maximum price generators can receive as too low, failing to reflect the rising costs of manufacturing and installing turbines.

The industry has been hit by inflation that has seen the price of steel rise by 40%, supply chain pressures and increases in the cost of financing.

Several companies, including the UK’s largest renewables generator SSE, have ruled themselves out of the auction, with one source saying the number of potential bidders was “between two and zero, with expectations at the lower end of that range”.

The renewables auction is an annual process in which the government attempts to incentivise private sector investment in a range of power sources through a mechanism known as “contracts for difference” (CfDs).

The auction works in reverse, with the government setting a maximum reference price, effectively a cap on what consumers can be charged, and in normal circumstances generators bid below that to provide power over a 15-year contract.

Under the CfD, generators are guaranteed a price for the power they produce, with the government making up the difference if wholesale prices fall below that price.

When wholesale prices are higher, as they have largely been since the Ukraine war began, generators pay the difference above the guaranteed price back to the Treasury.

‘The sums didn’t add up’

In theory this delivers value to consumers and suppliers but the chief executive of SSE, Alistair Phillips-Davies, told Sky News the price cap in this auction of £44MW/h, only a little above last year’s price, meant it was not viable.

“For the project we had, which is a little smaller than some and in deeper waters further north in the UK, we just wouldn’t have been able to even get a bid in at that cap price,” he said.

“The sums didn’t add up, we wouldn’t have been able to make an economic bid at that level. We’d have been struggling with write-offs, and we’ve seen some competitors in the sector have unfortunately suffered in recent weeks.”

Mr Phillips-Davies said the government needed to act now to ease market conditions for the renewables sector to ensure next year’s auction generated capacity.

He suggested additional taxes on renewables profits be withdrawn in 2024 rather than 2028, bringing the UK in line with Europe, extending capital allowances to compete with the US subsidy regime the Inflation Reduction Act (IRA), as well as ensuring a more realistic price cap in the next auction round.

He pointed to a recent auction in Ireland, operating under a different structure, that set a price of €150 MW/h.

He said: “I think people will need to look at the cap, while being sensitive to what consumers should be paying, and what we’ve got to do is be ambitious next year.

“We’ve got to be thoughtful about what we do and make sure that the next auction is constructed not only to get people to win an auction, but to actually build a piece of kit.”

This auction round, technically known as Allocation Round 5 (AR5) is expected to attract bids for solar and onshore wind capacity, but failure to secure significant new offshore wind capacity would be a blow to the government’s target of reaching 50GW by 2030.

‘Fingers in their ears’

It will also intensify the increasingly sharp debate over the true cost of achieving net zero to consumers and the public purse, as the energy transition moves from abstract policy theory to practical delivery.

Insiders say officials were repeatedly warned by industry that the auction would fail unless the price was increased.

Shadow energy secretary Ed Miliband said this week ministers “had put their fingers in their ears.”

The UK currently has 14GW of functioning offshore wind capacity, placing huge pressure on the next two annual auctions to fill the gap.

Offshore wind is the backbone of the UK’s renewable energy supply, providing 40% of electricity last year, and the target is a crucial plank in the wider goal of reaching net-zero by 2050.

Previous auctions have been successful in increasing offshore wind capacity, with last year’s round attracting 7GW of capacity from five operators.

One of those projects, run by Swedish state-owned power company Vattenfall, has already been mothballed however because of rising costs hitting the industry.

‘Very difficult market’ for offshore wind developers

Lisa Christie, UK country manager for Vattenfall, told Sky News the investment model no longer matched economic reality.

“The economics at the moment simply don’t stack up,” she said.

“There’s a number of reasons for that. It’s the war in Ukraine, we’ve seen rises in inflation, we’ve seen rises in the cost of capital, obviously rises in commodity costs.

“You put all of that together. And it’s just a very, very difficult market environment for offshore wind developers right now.

“I think we’re at a very difficult point. And we have a lot of offshore wind farms, including Vattenfall, that haven’t been able to take fields where perhaps you wouldn’t have expected them to do.

“So there is a challenge in the industry, I don’t think is insurmountable and there is still time for the government to turn this around.

“So what we’re really looking for is to put the CfDs back onto a financially sustainable footing and then we can reap the benefits that increased offshore wind deployment bring.”

Concerns UK will lose offshore wind superiority

Major suppliers to the industry are also concerned that any political drift in the build up to the election could see the UK lose its pre-eminence in offshore wind.

Laura Fleming, the UK managing director of Hitachi, which produces high-voltage direct cables that bring power onshore, said the UK needs to compete with more generous subsidy regimes around the world.

“The investment climate in the UK needs to send a clear signal that we are open for business, and compared to the IRA in the US, and the new green deal in Europe, we need to ensure that we still stand out.”

The renewables industry insists that even at a higher price in this auction, wind power would still be substantially cheaper than fossil fuel alternatives. At their peak last year wholesale gas prices were up to nine-times higher than offshore wind strike prices.

Renewables generated under CfDs can also return money to the taxpayer. Since the invasion of Ukraine forced up electricity prices many wind farms operating under CfDs have been paying back millions of pounds to the Treasury.

Mr Phillips-Davies said: “We’ve got to remember at the moment offshore wind is looking a bargain compared to wholesale energy prices. It’s half the price or less of where the current market is, so we need to be building more.”

Business

Concierge firm founded by Queen’s nephew hunts buyer

Published

6 hours ago

May 17, 2025

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Concierge firm founded by Queen's nephew hunts buyer

Quintessentially, the luxury concierge service founded by the Queen’s nephew, is in talks to find a buyer months after it warned of “material uncertainty” over its future.

Sky News has learned that the company, which was set up by Sir Ben Elliot and his business partners in 1999, is working with advisers on a process aimed at finding a new owner or investors.

City sources said this weekend that Quintessentially was already in discussions with prospective buyers and was anticipating receipt of a number of firm offers.

Sir Ben, the former Conservative Party co-chairman under Boris Johnson, owns a significant minority stake in the company.

The Quintessentially group operates a number of businesses, although its core activity remains the provision of lifestyle support to high net worth individuals including celebrities, royalty, and leading businesspeople.

It also counts major companies among its clients and offers services such as organising private jet flights and performances by top musicians.

The sale process is being overseen by a firm called Beyond, although further details, including the price that the business might fetch, were unclear on Saturday.

One insider said parties who had been contacted by Beyond were being offered the option to buy a controlling interest in Quintessentially.

This could be implemented through a combination of the repayment of outstanding loans, an injection of new funding into the business, and the purchase of existing shareholders’ interests, they added.

Quintessentially’s founders, including Sir Ben, are thought to be keen to retain an equity interest in the company after any deal.

In January 2022, newspaper reports suggested that Quintessentially had been put up for sale with a valuation of £140m.

Deloitte, the accountancy firm, was charged with finding a buyer at the time but a transaction failed to materialise.

Sir Ben, who was knighted in Mr Johnson’s resignation honours list, turned to one of Quintessentially’s shareholders for financial support during the pandemic.

World Fuel Services, an energy and aviation services company, is owed £15.5m as well as £3.5m in accrued interest, according to one person close to the process.

The loan is said to include a warrant to convert it into equity upon repayment.

Quintessentially does not disclose the number or identities of many of its clients, although it said in annual accounts filed at Companies House in January that it had increased turnover to £29.6m in the year to 30 April 2024.

The accounts suggested the company was seeing growth in demand from clients internationally.

“During the last year, we have not only renewed important corporate contracts like Mastercard, but have also expanded by adding new corporate clients like Swiss4 in the UK, R360 in India, and Visa in the Middle East and South America,” they said.

In its experiences and events division, it won a contract to work with the Red Sea Film Festival and to provide corporate concierge services to the Saudi Premier League.

It added that Allianz, the German insurer, BMW, and South African lender Standard Bank were among other clients with which it had signed contracts.

The accounts included the warning of a “risk that the pace and level at which business returns could be materially less than forecast, requiring the group and company to obtain external funding which may not be forthcoming and therefore this creates material uncertainty that may cast ultimately cast doubt about the … ability to continue as a going concern”.

This weekend, a Quintessentially spokesman declined to comment on the sale process.

Business

Superstar Adele joins backers of music royalties platform Audoo

Published

23 hours ago

May 16, 2025

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Superstar Adele joins backers of music royalties platform Audoo

Adele, the Grammy award-winning artist, has joined the list of music superstars investing in Audoo, a music technology company which helps artists to receive fairer royalty payments.

Sky News has learnt that the British musician and Adam Clayton, the U2 bassist, have injected money into Audoo as part of a £7m funding round.

The pair join Sir Elton John, Sir Paul McCartney and ABBA’s Bjorn Ulvaeus as shareholders in the company.

Changes to Audoo’s share register were filed at Companies House in recent days.

Audoo, which was established by former musician Ryan Edwards, is trying to address the perennial issue of public performance royalties, in order to ensure musicians are rewarded when their work is played in public venues.

Mr Edwards is reported to have been motivated to set up the company after hearing his own music played at football stadia and in bars, without any payment for it.

Estimates suggest that artists lose out on billions of dollars of unaccounted royalties each year.

London-based Audoo uses a monitoring device – which it calls an Audio Meter – to recognise songs played in public venues, and which is said to have a 99% success rate.

It has struck what it describes as industry-first partnerships with organisations including the music licensing company PPL/PRS to track and report songs played in public performance locations such as cafes, hair salons, shops and gyms.

“At Audoo, we’re incredibly proud of the continued support we’re receiving as we work to make music royalties fairer and more transparent for artists and rights-holders around the world through our pioneering technology,” Mr Edwards told Sky News in a statement on Friday.

“We have successfully reached £7m in our latest funding round.

“This funding marks a pivotal moment for Audoo as we focus on our growth in North America and across Europe, bringing us closer to our mission of revolutionising the global royalty landscape.”

Sources said the new capital would be used partly to finance Audoo’s growth in the US.

The latest funding round takes the total amount of money raised by the company since its launch to more than $30m.

Mr Edwards has spoken of his desire to establish a major presence in Europe and the US because of their status as the world’s biggest recorded music markets.

Adele’s management company did not respond to an enquiry from Sky News.

Business

The Sunday Times Rich List: Billionaires fall as King rises to match Rishi Sunak

Published

23 hours ago

May 16, 2025

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The Sunday Times Rich List: Billionaires fall as King rises to match Rishi Sunak

The King’s personal fortune has shot up by £30m to put him on par with Rishi Sunak and his wife Akshata Murty, while the overall number of billionaires in the UK has plummeted, according to The Sunday Times Rich List.

The 2025 list, published on Friday, shows the King’s personal wealth grew from £610m to £640m, taking him up 20 places to 258 – level with former prime minister Mr Sunak and his wife.

The number of overall UK billionaires has fallen to 156 from 165 in 2024, marking the biggest drop since the rich list began 37 years ago.

Gopi Hinduja and his family, behind the Indian conglomerate Hinduja Group, topped the list for the fourth year running with £35.3bn.

Meanwhile, founder and chairman of global chemicals company Ineos Sir Jim Ratcliffe, who became part owner of Manchester United last year, dropped from fourth place to seventh after his reported wealth went from £23.5bn to £17.05bn.

Sir Jim’s £6.47bn losses marked the biggest on the list, while Russian-born brothers Igor and Dmitry Bukhman, who built a fortune on mobile games such as Gardenscapes and Fishdom, made the biggest gains with nearly £6.2bn.

New entries included makeup mogul Charlotte Tilbury with £350m and Ellen DeGeneres, who left the US for the Cotswolds last year.

The Sunday Times said the list was one of its toughest to compile due to Donald Trump’s tariffs and the subsequent stock market turbulence, adding many from previous years had dropped off the list and others were no longer eligible having fled Britain after Labour’s non-dom crackdown.

Overall, the combined wealth of those on the list stood at £772.8bn – down 3% from the last list.

Speaking to Anna Jones on Sky News Breakfast, Rich List compiler Rob Watts highlighted the story of Tom and Phil Beahon, who own sportswear clothing brand Castore which is now worth £1bn, as one of his favourites.

The brothers from Wirral have debuted at joint 345 on the list with an estimated wealth of £350m.

Calling their story “inspiring”, Mr Watts said: “They dreamed of being sportsmen as lads – one of them got onto the books of Tranmere Rovers and the other played cricket for Lancashire, but their sporting careers were over in their early 20s.

“And they say that failure was critical to driving them to create this £1bn sports kit business that you’ll now see being worn by the England cricket team and the England rugby team.”