UK ups CfD strike prices to attract bidders21 December 2023
Responding to the failure of the UK’s 2023 CfD (Contracts for Difference) auction to attract any bidders whatsoever from the offshore wind sector, the government has raised the maximum bid prices, aka strike prices, that offshore wind and other renewables projects can receive in the next auction, Allocation Round 6, to be held in 2024.
For AR6, the maximum strike price has been increased by 66% for offshore wind projects, from £44/MWh to £73/MWh, and by 52% for floating offshore wind projects, from £116/MWh to £176/MWh.
In AR6, offshore wind will also be given a separate funding pot “in recognition of the high number of projects ready to participate.” This will ensure “healthy competition among a strong pipeline of projects, helping the UK deliver on its ambition of up to 50 GW of offshore wind by 2030, including up to 5 GW of floating offshore wind.”
“We recognise that there have been global challenges in this sector and our new annual auction allows us to reflect this,” said Energy Security Secretary Claire Coutinho.
The government is also increasing maximum bid prices for other technologies, including: geothermal by 32% – from £119/MWh to £157/MWh; solar by 30% – from £47/MWh to £61/MWh; tidal by 29% – from £202/MWh to £261/MWh.
The government is also proposing to assess applications for the 2025 auction (AR7) not just on their ability to deliver low cost renewable energy, but also on how much a project strengthens the environmental and economic sustainability of the industry. As part of this, a project’s social impact will also be considered – including how supply chains affect jobs and communities. A consultation has been launched that invites views on how “sustainable industry rewards”, formerly “non-price factors”, could be incorporated into the 2025 auction process. This would be for offshore wind and floating offshore wind companies and would mean additional payments if they reduce the carbon emissions in their supply chains, or if they improve their social benefits. This could be done by investing in high-skilled jobs, using more environmentally friendly factories to assemble components, such as wind turbines, investing in new manufacturing facilities or skills in deprived areas, or finding new, innovative ways to reduce carbon emissions, for example.
There is the potential “to attract a record level of private investment in offshore wind projects next year”, the government believes, with at least ten projects likely to be eligible.