5.3 GW of UK Offshore Wind Projects Secure Contracts for Difference

September 3, 2024, by Adnan Memija

Offshore wind developers have been awarded contracts for approximately 5.3 GW of capacity in the UK’s latest Contract for Difference (CfD) Allocation Round 6 (AR6). Ørsted received the largest CfD for offshore wind, securing 2.4 GW for the Hornsea 4 offshore wind project.

The offshore wind farms awarded CfDs are the 288 MW Inch Cape and Moray West (for 73.50 MW) in Scotland, the 963.07 MW East Anglia Two and East Anglia Three (for 158.90 MW), the 2,400 MW Hornsea 4 and Hornsea 3 (for 1,080 MW) in England.

“After the failure of last year’s offshore wind auction, it was essential that this auction succeeded and the fact that nine major offshore wind projects have secured contracts will increase investor confidence. There is intense global competition in offshore wind and the next auctions will be crucial for the UK“, said Dan McGrail, RenewableUK’s Chief Executive.

The UK’s fifth CfD round closed in September last year 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.

A total of 9.6 GW of renewable energy capacity was awarded across all technologies in the AR6 auction.

In the Round 6 auction, nine contracts for fixed-bottom projects were awarded, totalling 4.9 GW, while a single contract was granted for a floating wind project to Green Volt Offshore Windfarm, a consortium of Flotation Energy and Vårgrønn.

The strike price for the 400 MW Green Volt project was GBP 139.93/MWh.

“This funding will kickstart the next phase of Europe’s largest floating wind project 80 km off the coast of Northeast Scotland. Green Volt is a huge £2.5 billion project. It will create over 2,800 jobs during construction. Once operational, the floating offshore windfarm will supply clean power to the UK grid, while also supplying renewable electricity to nearby oil and gas platforms”, said Nicol Stephen, CEO of Flotation Energy.

Inch Cape Offshore Limited, a joint venture between ESB and Red Rock Renewables, has been awarded a CfD for its offshore wind farm in Scotland.

The AR6 award of 266 MW will top-up the project’s previous CfD award from Allocation Round 4.

“The award of the CfD is an important milestone for the project as we continue to work closely with our key suppliers and stakeholders towards achieving financial close later this year”, said John Hill, Inch Cape Project Director.

Located in the North Sea off the Angus coast, the Inc Cape offshore wind farm will connect to the national grid via an 85-kilometre offshore cable route and through an onshore substation currently under construction at Cockenzie in East Lothian.

The UK government granted East Anglia Three Limited a CfD for a 158.90 MW share of the East Anglia THREE offshore wind farm and East Anglia Two Limited a 963.07 MW CfD for the East Anglia Two project.

The two projects are being developed by ScottishPower Renewables, Iberdrola’s company in the UK.

The UK Department for Energy Security and Net Zero (DESNZ) has awarded Ørsted CfD for a 1,080 MW share of the Hornsea 3 Offshore Wind Farm, as well as a 2,400 MW CfD for Hornsea 4.

CfDs were awarded at inflation-indexed strike prices of GBP 54.23/MWh for the share of Hornsea 3 and GBP 58.87/MWh for Hornsea 4.

“We’re pleased with the outcome of allocation round 6, which is an important milestone for two of the world’s largest offshore wind farms. We look forward to delivering these landmark projects, which will supply renewable power at large scale to UK consumers and businesses and help the UK government achieve its target of quadrupling offshore wind capacity to 60 GW by 2030”, said Rasmus Errboe, Deputy CEO and Chief Commercial Officer at Ørsted.

The 2.9 GW Hornsea 3 offshore wind farm, located approximately 160 kilometres off the Yorkshire coast, will feature 200 Siemens Gamesa’s 14 MW wind turbines and is expected to be operational in 2027.

Ørsted expects to take the final investment decision on Hornsea 4 within the next 18 months and is currently targeting the commissioning of the project before the end of 2030.

In July, the UK government decided to increase the budget for AR6 to GBP 1.5 billion, including GBP 1.1 billion for offshore wind.

The funding uplift represented more than a 50 per cent increase on the budget previously set in March this year.