The Department for Energy Security and Net Zero has announced the outcome of Contracts for Difference (CfD) AR7, awarding 8.4 GW of offshore wind capacity. This capacity is expected to generate enough clean electricity to meet the needs of the equivalent of over 12 million homes. The results follow the failure of Auction Round 5, in which no offshore wind projects were awarded, while AR6 helped restore market participation.
The auction outcomes also highlighted cost competitiveness relative to fossil fuel generation. Based on newly published levelised cost of energy figures, the cost of building and operating a new gas-fired power plant reportedly stands at around £147 per MWh, while the average price achieved for fixed offshore wind in this auction was about £90.91 per MWh, or approximately £65.25 per MWh in 2012 benchmark prices. This reflects a reduction of around 40 per cent compared to new gas generation.
Moreover, the auction is expected to unlock nearly £22 billion in private investment Projects awarded span all parts of the UK. These include major fixed offshore wind projects such as Dogger Bank South off the Yorkshire coast, Norfolk Vanguard off East Anglia, Berwick Bank in the North Sea, and Awel Y Môr in Wales. Additionally, floating offshore wind projects were awarded, including Erebus in the Celtic Sea and Pentland in Scotland, with backing from Great British Energy and the National Wealth Fund.
REGlobal’s Views: This is one of the largest ever offshore wind auctions in Europe’s history. UK targets at least 47 GW of offshore wind capacity by 2030, and has roughly 17 GW installed till date with another 11 GW under construction. These new project allocations will help bring the country closer to its targets provided they are implemented in a timely manner. The offshore wind segment has faced many upheavals recently due to supply chain issues and rising costs, and this new auction resulting in competitive prices has helped boost investor confidence in the sector.