Offshore wind set for largest CfD budget share in UK tender

UK seeks up to 3.5GW of onshore wind in long-awaited tender round, but does not set capacity limit for offshore wind

by Craig Richard 13 September 2021

ScottishPower Renewables secured a deal for its East Anglia One project in the first CFD auction in 2015

The UK government is set to offer £265 million* (€310 million) annually for project operators successful in its forthcoming contract for difference (CfD) auction.

Fixed-bottom offshore wind is due to receive the bulk (up to £200 million) of these annual payments, while £24 million will be reserved for floating offshore wind, and a further £10 million will be allocated to onshore wind and solar PV.

The Department for Business, Energy and Industrial Strategy (BEIS) has not imposed a capacity limit on offshore wind, but has capped combined onshore wind and solar at 5GW. The maximum limit for either technology is set at 3.5GW. Onshore wind and solar will also compete against other "established technologies", including hydro and energy from waste with combined heat and power for the 5GW on offer.

The government will offer 15-year contracts to operators, through which they receive a fixed price for output from their energy projects. Operators receive the wholesale market price and an additional fee if this is below the stipulated price, or – if the market price is above this stipulated price – they reimburse the government.

BEIS aims to double the renewable energy capacity secured in the third CfD round in 2019 (5.75GW), it stated. Nearly 5.5GW of offshore wind projects won CfD deals in the last round, with the lowest prices at £39.65/MWh.

RenewableUK CEO Dan McGrail said: “Today’s announcement will encourage even greater investment in renewables and is a huge boost for the UK’s green recovery. We could see investment of over £20 billion on the back of the next clean power auction, which will boost jobs and the UK supply chain, and cut costs for consumers in the transition to net zero.

"In this round we want to see just how low the price of new solar and onshore wind has fallen in the past five years, and make sure that the auction does the heavy lifting to take us towards our 2030 target of 40GW offshore wind."

* All budgets are in 2012 prices. The £265 million budget for the fourth CFD tender round is equivalent to about £331 million (€387 million) today.