The maximum prices available for offshore wind was increased by 66% for offshore wind projects and by 52% for floating offshore wind projects
(Credit: richardghawley/ Flickr)
The UK Government has raised the maximum price for offshore wind projects in its primary renewables initiative, solidifying the country’s position as a global leader in clean energy. Through a thorough examination of current evidence, considering factors such as the influence of global events on supply chains, the government has adjusted the maximum allowable price for offshore wind and other renewable projects in the upcoming Contracts for Difference (CfD) auction, aiming to optimise the programme’s performance.
The Contracts for Difference (CfD) scheme plays a pivotal role in assuring renewable energy projects of a government-guaranteed price for their electricity generation. This mechanism serves as a catalyst for sustained investment in the UK, a country that already boasts the world’s five largest operational offshore wind farm projects. Notably, the UK has seen a remarkable surge in renewable energy, with electricity generation from renewables escalating from 6% in the first quarter of 2010 to an impressive 48% in the first quarter of the present year.
In preparation for Allocation Round 6 (AR6) next year, there has been a substantial adjustment in the maximum strike prices. For offshore wind projects, the maximum strike price has surged by 66%, rising from £44/MWh to £73/MWh. Simultaneously, floating offshore wind projects have witnessed a 52% increase, elevating the maximum strike price from £116/MWh to £176/MWh. This strategic move aims to further incentivize and support the burgeoning renewable energy sector in the UK.
This adjustment in maximum strike prices is geared towards fostering sustainable pricing, enhancing the economic viability of projects, and facilitating competitive participation in Allocation Round 6 (AR6). Building on the achievements of prior Contracts for Difference (CfD) auctions, which have already allocated contracts for approximately 30GW of new renewable capacity across various technologies since 2014, this initiative aims to continue the success story.
In a strategic move, offshore wind projects will enjoy a separate funding allocation in AR6, reflecting the substantial number of projects ready to engage. This allocation is designed to stimulate robust competition within a robust project pipeline, contributing to the UK’s ambitious target of achieving up to 50GW of offshore wind by 2030, including a significant 5GW from floating offshore wind projects. This approach ensures a dynamic and competitive landscape, further propelling the nation’s commitment to a sustainable and diversified energy future.
Established nearly a decade ago, the Contracts for Difference (CfD) initiative has played a pivotal role in driving down the costs of renewables. Its primary goal is to provide good value to electricity consumers while fostering a competitive environment that encourages cost reduction. Aligned with the government’s broader ambitions, this initiative is poised to generate tens of thousands of new jobs by 2030, contributing significantly to the Prime Minister’s priority of economic growth.
In a noteworthy development, the government is unveiling refined proposals for the review of applications from the 2025 auction. Beyond assessing a project’s capacity to deliver low-cost renewable energy, the evaluation will now extend to measure the extent to which a project enhances the environmental and economic sustainability of the industry. Notably, the social impact of a project will also be taken into account, encompassing considerations of how supply chains influence jobs and communities.
In addition to the adjustments in maximum bid prices for offshore wind projects, the government is taking steps to provide assurance for developers across various renewable technologies, positioning the UK at the forefront of the renewable energy landscape. The revised maximum bid prices for different technologies are as follows:
– Geothermal: Increased by 32% from £119/MWh to £157/MWh.
– Solar: Elevated by 30% from £47/MWh to £61/MWh.
– Tidal: Raised by 29% from £202/MWh to £261/MWh.
These adjustments aim to ensure that developers have the certainty needed for investment, promoting innovation and maintaining the UK’s leadership in diverse renewable energy sources. It’s noteworthy that Contracts for Difference are currently allocated through a competitive auction process, emphasising the government’s commitment to a transparent and competitive approach in advancing renewable energy projects.
Energy Security Secretary Claire Coutinho said: “The UK is home to the world’s 5 largest offshore wind farms projects.
“Today we have started the process of our latest Contracts for Difference auction for renewables, opening in March next year. We recognise that there have been global challenges in this sector and our new annual auction allows us to reflect this.
“This is a vital part of our plan to have enough homegrown clean energy, bringing bills down for families and strengthening our energy independence.”