Vestas Warns UK Wind-Auction Change Threatens Factory Investment

(Bloomberg) -- A UK proposal to relax criteria for offshore wind developers taking part in project auctions threatens to undermine confidence to invest in factories needed for the farms, Vestas Wind Systems A/S said.

That’s because easing the rules raises the risk that some developers may end up not building projects or take longer to do so, according to Henrik Andersen, chief executive officer of Europe’s biggest turbine maker. The warning comes as Britain seeks to encourage more spending on supply chains to support its growing fleet of offshore farms, deliver jobs and boost the economy.

The UK has built up by far the largest capacity of offshore wind farms in Europe, thanks largely to government auctions for contracts that fix power prices for 15 years. The nation will need to deliver record amounts of capacity in upcoming auctions to have any chance of reaching a goal to almost eliminate fossil fuels from the power grid by 2030.

As part of efforts to get more projects going, the government has proposed allowing developers who haven’t secured planning consent from the government to bid into the auction process. The Vestas CEO says that change increases the risk that winning bidders might not ultimately be able to actually build their project, or only be able to do so on a more delayed timeline than in the past.

Previous auctions have only included fully permitted projects, and non-permitted ones shouldn’t be allowed, according to Andersen.

“We are creating jobs, creating manufacturing capacity, and if there’s no demand for the capacity the jobs should not be created,” he said in a interview Thursday on the sidelines of a conference in London hosted by the International Energy Agency and UK government. “There’s nothing worse than mobilizing a factory and then idling a factory afterward.”

While the UK’s auction system has helped deliver billions of pounds of wind investment, there have been issues. A 2023 auction failed to draw any bids because the maximum power price allowed was seen as too low for developers to make a profit. The government subsequently raised the maximum price and overall budget, helping to draw successful bidders in an auction held last year. 

While that result was encouraging, Andersen said there needs to be consistency. That means the upcoming auction — known as allocation round seven — will be important, but so too will be the ones after that.

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