UK Boosts Sixth CfD Auction Budget, Earmarks GBP 1.1 Billion for Offshore Wind

July 31, 2024, by Adnan Memija

The UK government has decided to increase the budget for the next Allocation Round 6 (AR6) to GBP 1.5 billion, including GBP 1.1 billion for offshore wind. The funding uplift represents more than a 50 per cent increase on the budget previously set in March this year.

At the beginning of this year, the UK government revealed a budget of GBP 1 billion for this year’s Contracts for Difference (CfD) AR6 with the majority of it, GBP 800 million, earmarked for offshore wind.

However, the new budget, announced on 31 July by the UK’s Secretary of State for Energy Security and Net Zero, Ed Miliband, marks a GBP 500 million increase over the funding set by the previous Conservative government.

The scheme’s design means the central government’s budget will not be impacted, following findings from a Treasury spending audit revealed GBP 22 billion of unfunded pledges inherited from the previous government, according to the press release.

“Offshore wind is critical to hitting the government’s 2030 target and we know that the vast majority of this capacity must be delivered through this auction round and next year’s. That remains a huge challenge but this is certainly a big step in the right direction and another welcome demonstration of the government’s ambitions,” said Emma Pinchbeck, Chief Executive of Energy UK.

Since 2022, the UK has a 2030 target of 50 GW but the new Labour government is set to increase this to 60 GW, 55 GW for fixed-bottom and 5 GW for floating offshore wind.

In AR6 of the CfD scheme, taking place this August, GBP 1.1 billion will be available for offshore wind developers. This represents a GBP 300 million increase from the amount promised in March this year.

The UK’s fifth CfD round closed in September 2023 and saw the UK government awarding 3.7 GW of renewable energy projects, however, none of those were offshore wind farms as offshore wind developers placed no bids.

“Last year’s auction round was a catastrophe, with zero offshore wind secured, and delaying our move away from expensive fossil fuels to energy independence. Instead, we are backing industry to build in Britain, with this year’s auction getting its biggest budget yet,” stated Energy Secretary Miliband.

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The CfD offers developers initial subsidies for clean electricity projects, which are repaid when wholesale electricity prices exceed the agreed CfD price.

The AR6 budget will also include GBP 185 million for established technologies such as onshore wind and solar, an uplift of GBP 65 million.

Another GBP 270 million is planned for emerging technologies such as floating offshore wind and tidal, an uplift of GBP 165 million.

Successful projects are expected to be announced in September 2024.

“Increasing the budget by more than 50 per cent will boost industry confidence to back clean energy, attracting cutting edge clean technologies to Britain as we accelerate to a decarbonised power sector by 2030,” said UK Energy Minister Michael Shanks.

Last week, the government launched Great British Energy in partnership with the Crown Estate, backed by GBP 8.3 billion of new money, which is estimated to create up to 20-30 GW of new offshore wind developments reaching the seabed lease stage by 2030.