Doubling the size of the budget for offshore wind in Allocation Round 7 to £1.8bn would be cost neutral if capacity is procured at a strike price of £94.50 per megawatt-hour, according to new analysis published by Baringa.
The study commissioned by Masdar predicted this could result in around 8GW clearing the auction when results are announced in mid-January from a total of nearly 25GW that was eligible to enter the auction.
Baringa added that capping the budget at its existing level of £900m would add £363m to consumer bills each year by delaying the deployment of around 3GW.
This figure was calculated primarily from increased wholesale prices, but also wider socio-economic costs caused by the failure to secure the 4,500 jobs and £6bn to £9bn gross value added offered by rolling out the additional capacity.
The report argued this could rise to £2bn per year under a gas price shock scenario.
Baringa said: “Using the Secretary of State’s flexibility to allocate projects in AR7 beyond the current budget would drive the above benefits for consumers and significantly close the gap to the Clean Power 2030 target.”