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The funding was announced in the country's spring budget in a document published alongside Jeremy Hunt, the UK chancellor's statement on Wednesday (6 March) detailing the UK's spending plans.
It said that the government’s “full parameters for AR6” would include “setting the largest ever budget for a single round, of over £1 billion”, with a reported £800 million of that total allocated for offshore wind's role in the tender.
The UK said it was raising its strike prices for wind energy last year after the failure of its most recent CfD auction (AR5) failed to attract any bids for offshore wind development.
Industry observers warned that the former maximum strike prices of £44/MWh for offshore wind with fixed-bottom foundations and £116/MWh for floating offshore wind in AR5 were rates that industry observers were unlikely to attract investors.
Consequently the maximum price available for offshore wind with fixed-bottom foundations was raised by 66% – from £44/MWh (€50/MWh) to £73/MWh.
The maximum price for floating offshore wind projects went up 52% – from £116/MWh to £176/MWh .
'Missed opportunity'
Wednesday’s announcement of a record-breaking £1 billion for AR6 met with mixed feedback from renewable energy industry insiders.
RenewableUK’s chief executive Dan McGrail said: “Although we welcome this budget increase, as it recognises that global economic conditions have changed, the Treasury has missed the opportunity to maximise the amount of offshore wind capacity which the UK could have secured in this year’s auction for new clean energy projects.
“We have more than 10 gigawatts of capacity eligible to bid in this summer. Building this is essential if we’re to make up lost ground from last year’s auction and create the substantial pipeline required to accelerate supply chain investment and growth in the UK. This funding will only secure between 3 to 5 gigawatts.
Scottish Power, a subsidiary of Spanish utility Iberdrola, welcomed the increased auction budget.
“The Government has taken a major step in the right direction today by quadrupling the available budget – a clear statement of intent in ramping up the ambition to bring cheaper, greener energy onto the system quickly… I expect the auction to be hugely competitive,” Keith Anderson, CEO of Scottish Power, said.
Energy market intelligence firm Aurora Energy Research meanwhile suggested the chancellor's budget would put the UK’s renewable energy goals further out of reach.
“The Spring Budget puts the Government’s ambition of delivering 50GW offshore wind by 2030 increasingly out of reach: over 18GW of offshore wind capacity will need to be procured in AR7,” said Ashutosh Padelkar, senior associate of power and renewables at the firm.
"Even with a budget of over £1bn and £800m specifically for offshore wind, AR6 could procure between 3-6GW of offshore wind assuming strike prices between £73 and £50 per MWh,” he added. Padelkar pointed to the gulf between the UK’s current offshore wind fleet capacity of around 14GW and its 50GW target.
In addition to the extra funding for AR6, Hunt allocated up to £120 million more for the energy security and net zero ministry’s Green Industries Growth Accelerator (GIGA) “to build supply chains for new technology from offshore wind to carbon capture and storage”.
Up to £390 million of the GIGA's funding is now expected to go to "supply chains for offshore wind and electricity networks", the Treasury said.
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