Changes to its Contract for Difference (CfD) auction scheme will enable a huge volume of offshore wind capacity to participate in the UK’s next auction for renewable energy, Auction Round 7 (AR7)
Commenting on the UK Government’s publication of the framework governing the next auction for new clean energy capacity, scheduled to be luanched in August 2025, RenewableUK policy manager Nick Hibberd said, “The release of key details about the upcoming clean power auction provides much-needed clarity and certainty for investors in vital new renewable energy projects.
“Maximising the amount of capacity we secure in this round, and in next year’s auction, will be absolutely crucial to keep us on track to reach the Government’s target of clean power by 2030.
“Projects awarded contracts in these two auctions can be built in time to achieve that goal. This new capacity will also strengthen the UK’s energy security significantly.
“We are delighted to see that Government committed to extending the contract length for CfD from 15 years to 20 years, which will boost the attractiveness of new UK projects at a time of intense international competition for private investment.”
The Government is also allowing unconsented fixed-bottom offshore wind projects to bid into this auction for the first time, although this will only be possible under strict criteria, after projects have already completed some stages of the application process.
According to Renewable UK, the chnages mean that 20 GW of offshore wind is now eligible to bid into this auction, which is more than the UK’s entire current offshore wind capacity of nearly 16 GW.
“The focus should therefore be on ensuring that projects are delivered in a timely way to contribute to Clean Power by 2030,” said Renewable UK. “We welcome the new budget-setting process, in which the Secretary of State will have partial visibility on sealed bid information for projects that breach the initial budget. The budget can then be increased to procure projects above the initial budget if they are deemed to be good value for money for consumers. This will mitigate the risk of significant budget underspend we have seen in previous years and ensure we maximise the deployment of high quality renewable energy projects in this auction.
“We are pleased that the Government has taken on board the industry’s recommendations to kickstart floating wind at scale by setting a budget at the right level to enable test and demonstration projects to go ahead in this auction. This is a crucial step forward which will enable the UK to remain a global leader in this innovative technology.
“We also welcome the Government’s commitment to encourage the repowering of older onshore wind projects by providing CfD support as a key measure which will help us to double the UK’s onshore wind capacity by 2030.
“If we are to attract the record amount of investment this year, we need to see the rest of the auction details set out as soon as possible. These should include more realistic expectations of future electricity prices to estimate the value of new projects more accurately, and administrative strike prices which reflect global cost pressures. We would also advise the Government to provide greater flexibility to developers on the delivery milestones for projects, to enable cost reduction and mitigate supply chain and construction challenges.”
Also Responding to the Government’s announcement on further reforms to the CfD scheme for AR7, Energy UK chief executive Dhara Vyas said, “The CfD scheme has been successfully supporting major projects like offshore windfarms for many years now and will continue to play a crucial role in meeting the country’s clean energy ambitions, strengthening our energy security and stabilising bills.
“It is good to see the scheme evolving to meet the current challenges and attract the investment necessary. In particular, increasing contract lengths will boost the investor confidence essential for developers to commit to large-scale and long-term projects. Investor confidence not only reduces project costs, it also encourages more projects to bid, further increasing the competitive pressure which can reduce prices further.
“While changing the eligibility criteria around planning consent could also increase the number of bidders, we would underline the need for the safeguards outlined by the Government and to continue the focus on timely consenting of projects.
“We look forward to the Government providing more detail around parameters for the next auction soon. Doing so will provide important clarity ahead of the most significant auction to date and help deliver more of our own clean energy sources to reduce the country’s expensive reliance on fossil fuels.”
