The Offshore Wind Industry Council (OWIC) has welcomed today’s Contracts for Difference (CfD) Allocation Round 4 result for offshore wind, which has achieved a record low strike price.
Five offshore wind projects totalling almost 7GW have secured Contracts for Difference in the UK’s fourth allocation round, which awarded support to a total of 11GW of renewables schemes.
The offshore projects landed CfDs at a strike price of £37.35 per megawatt-hour, down from the lowest rate in the 2019 round of £39.65/MWh.
OWIC co-chair Danielle Lane (Vattenfall) said: “Today, offshore wind has achieved the best value strike price ever for any technology.
“As these projects come online they will help bring down the cost of electricity bills for households currently struggling due to astronomical gas prices.”
To meet the Government’s ambitious targets, she said the UK must now ensure that the next annual auction maintains this “terrific momentum”, as well as ensure that it continues to grow the supply chain using the CfD mechanism.
Meanwhile, WindEurope chief executive officer Giles Dickson said the awarded 7GW capacity “cements the UK’s position as a global leader in renewables”.
He added: “The strong competition and competitive prices also show the UK has the right basic auction design with CfDs.
“They’ve shown again how cheap CfDs are for Governments – because they get paid back as well as paying out.
“CfDs also keep finance costs low because investors are guaranteed stable revenues. Those countries still not using CfDs should start doing so.”
All projects are due online in delivery years 2026-27, according to the results published by Energy Department BEIS this morning.
Orsted has landed the largest deal with 2.9GW for its Hornsea 3 off Yorkshire.
The government said the competitive nature of the scheme has continued to place downward pressure on prices.
It said the per unit (MWh) price of offshore wind secured in this round is almost 70% less than that secured in the first allocation round, in 2015.
See here for our full story on offshore wind’s success in the auction.
Solar was the next biggest winner landing 2.2GW of capacity at strike prices of £45.99/MWh across both delivery years 2023-24 and 2024-25.
Onshore wind landed 1.5GW of capacity, 887MW of mainland projects and almost 600MW of remote islands wind.
The former came in at a strike price of £42.47/MWh in the 2024-25 delivery years while remote island wind notched contracts at £46.39/MWh.
Hexicon secured the only floating offshore wind CfD with a 32MW TwinHub project with a strike price of £87.30/MWh.
Tidal stream also got in on the act with 41MW of schemes securing support totalling £178.54/MWh.
Overall, 93 projects with existing planning permission across England, Scotland and Wales have won contracts through the competitive auction process, which is more than in all three previous rounds combined.
Business and Energy Secretary Kwasi Kwarteng said: “Eye-watering gas prices are hitting consumers across Europe. The more cheap, clean power we generate within our own borders, the better protected we will be from volatile gas prices that are pushing up bills.
“Thanks to today’s record renewable energy auction, we have secured almost 11GW of clean, home-grown electricity– which would provide as much power as around 6 gas fired power stations.
“These energy projects already have planning permission, now they have a funding contract in place. We’re going to these projects built as soon as possible to better protect millions of British families from rising costs.”
CfDs are the Government’s primary method of supporting renewable energy, driving down the cost of technologies and playing an important role in leveraging £90bn (€106.9bn) of private investment by 2030.
The auction scheme has already proved successful at bringing down the cost of offshore wind by around 65% over the past decade – helping the UK become one of the world’s largest generators of wind power.
In the last allocation round, 12 new contracts were awarded, with the potential for nearly 6GW of further capacity.
From 24 May 2022, National Grid ESO invited qualifying applicants to submit their sealed bids.
The sealed bid window for Round 4 closed on 15 June with National Grid ESO then running the allocation/auction process.
The allocation process was then followed by an independent audit, with the results announced once qualifying applicants had been informed of the results of the auction.