No energy companies have submitted bids in the government’s offshore wind auction, sources have said, in what would be a significant blow to Rishi Sunak’s plans to meet climate targets and drive down energy bills.

Industry insiders suggested not a single firm had taken part in the auction for financial support contracts after the government ignored warnings that the offer was too low to reflect soaring costs.

The latest announcement, expected on Friday, could have brought an extra 5 gigawatts of power – enough to power 5m homes. Instead, consumers will miss out on savings of up to £1bn every year in annual energy usage, relying on more expensive gas instead.

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Ed Miliband, the shadow climate change secretary, told the Guardian: “If confirmed, this will be an energy disaster and a £1bn Tory bombshell that will push bills up for hardworking families.

“The Conservatives have now trashed the industry that was meant to be the crown jewels of the British energy system … they broke the onshore wind market by banning it, they undermined the solar industry, and they caused chaos in the home insulation market.

“Every family and business is paying the price for these failures in higher energy bills, and our country remains exposed.”

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The auction uses a mechanism known as contracts for difference, which guarantee consumers will pay a fixed price for the energy generated by the bidder. When wholesale prices are lower, subsidies added to customer bills top up the difference; when wholesale prices are higher, developers backpay the difference.

In recent decades, the price of offshore wind power has fallen steeply. For this year’s auction, the government set a maximum price of £44 a MW hour, a similar level to the previous round.

But the maximum seems to have been too low to attract bids. Offshore wind developers face soaring construction costs, owing to rising inflation and higher borrowing costs.

This summer such inflationary pressures caused work to stop on a large-scale offshore windfarm off the Norfolk coast. The Swedish energy firm Vattenfall said it would cease working on the multibillion-pound Norfolk Boreas windfarm, designed to power the equivalent of 1.5m British homes, because its costs had increased by more than 40%, so it was no longer profitable.

At the time, industry experts told ministers that unless the government’s financing approach was changed to take into account the steep increase in costs, developers would be forced to scrap or delay their plans.