Maximum price that other renewables projects can receive in the next Contracts for Difference (CfD) auction has also been raised
The government has increased the maximum price for offshore wind projects in its flagship renewables scheme to further cement the UK as a world leader in clean energy.
Following an extensive review of the latest evidence, including the impact of global events on supply chains, the government has raised the maximum price offshore wind and other renewables projects can receive in the next Contracts for Difference (CfD) auction to ensure it is performing effectively.
The CfD scheme ensures renewable energy projects receive a guaranteed price from the government for the electricity they generate, encouraging continued investment in the UK - which is already home to the world’s 5 largest operational offshore wind farm projects and has increased electricity generation from renewables from 6% in the first quarter of 2010 to 48% in the first quarter of this year.
The maximum strike price has been increased by 66% for offshore wind projects, from £44/MWh to £73/MWh, and by 52% for floating offshore wind projects, from £116/MWh to £176/MWh ahead of Allocation Round 6 (AR6) next year.
This will help ensure projects are sustainably priced and economically viable to compete in AR6, building on the success of previous CfD auctions. These have so far awarded contracts totalling around 30GW of new renewable capacity across all technologies since 2014.
In AR6, offshore wind will also be given a separate funding pot in recognition of the high number of projects ready to participate. This will ensure healthy competition among a strong pipeline of projects, helping the UK deliver on its ambition of up to 50GW of offshore wind by 2030, including up to 5GW of floating offshore wind.
First established nearly a decade ago, the CfD has helped reduce the cost of renewables. It aims to deliver good value to electricity consumers and drive down costs. The government’s ambitions will create tens of thousands of new jobs by 2030, while also delivering the Prime Minister’s priority of growing the economy.
The government is also today (Thursday 16 November 2023) publishing developed proposals to review applications from the 2025 auction not just on their ability to deliver low cost renewable energy, but also on how much a project strengthens the environmental and economic sustainability of the industry. As part of this, a project’s social impact will also be considered – including how supply chains affect jobs and communities.
Energy Security Secretary Claire Coutinho said:
Minister of State for Energy Security and Net Zero Graham Stuart said:
Exchequer Secretary to the Treasury Gareth Davies MP said:
The government is also increasing maximum bid prices for other technologies, offering certainty for developers, and keeping the UK at the cutting edge of all renewables. These include:
Contracts for Difference are currently awarded based on the outcome of a competitive auction.
The consultation published today invites views on how Sustainable Industry Rewards, formerly non-price factors, could be incorporated into the 2025 auction process. This would be for offshore wind and floating offshore wind companies and would mean additional payments if they reduce the carbon emissions in their supply chains, or if they improve their social benefits, ensuring AR7 is the cleanest and most impactful auction yet.
This could be done by investing in high-skilled jobs, using more environmentally friendly factories to assemble components, such as wind turbines, investing in new manufacturing facilities or skills in deprived areas, or finding new, innovative ways to reduce their carbon emissions, for example.
Building a more secure energy future will increase developer confidence in the sector every year. It will also enhance the UK’s reputation as one of the most attractive places to invest in renewables.
The introduction of annual auctions last year means project developers now have more frequent opportunities to participate. This also allows the government to respond more quickly to ensure the scheme continues to support the sector, maintain investment and continue its success.
The government is also taking significant steps to ensure homes and businesses across the country can access the electricity produced from these new renewable projects by accelerating grid infrastructure and connections. A Connections Action Plan will be published later this year to reform the connection process and reduce connection timescales.
RenewableUK’s Chief Executive Dan McGrail said:
Emma Pinchbeck, Energy UK’s Chief Executive, said:
Wider Stakeholder Commentary
Tom Glover, RWE UK Country Chair, said:
Keith Anderson, Chief Executive of ScottishPower, said:
Chris Hewett, Chief Executive of Solar Energy UK, said:
Duncan Clark, Head of UK Region at Ørsted, said:
Alistair Phillips-Davies, Chief Executive, SSE plc, said:
Halfdan Brustad, VP UK Renewables at Equinor, said:
Matthieu Hue CEO at EDF Renewables UK, said: