The results from Allocation Round 5 (AR5) of the Contracts for Difference (CfD) scheme were announced on 8th September. No new offshore wind projects won contracts after it was revealed that there were no bids from this technology in the auction.
This is a huge blow to the UK’s renewable policy, which targets up to 50 GW of offshore wind by 2030.
Want to get the data? Click here to download the results to AR5 in Excel format
Inflation hits offshore wind’s chances in the CfD
It had been well-publicized before the auction that offshore wind would struggle to earn contracts that made new contracts feasible. This was after an Administrative Strike Price of £44/MWh was set for offshore wind. This is the highest price the technology would have been able to secure.
The impacts of inflation on offshore wind development costs were confirmed when Vattenfall announced that work had been halted on the 1.4 GW Norfolk Boreas offshore wind farm, which had won a contract in the previous auction.
The scale of modern offshore wind projects means they almost entirely rely on government-backed CfDs to be built. Without a CfD that works for offshore wind, there is very little chance for the new capacity needed by 2030 to be built.
The results have seen quick responses from various renewable industry groups. Regen called for an “Urgent government response needed to rebuild leadership in UK offshore wind”. RenewableUK stated, "Industry needs to see a package of reforms to the CfD, support for supply chains and fiscal measures to attract clean energy investment into the UK in the face of global competition.”
Solar and onshore wind are the big winners from Allocation Round 5
With no offshore wind even bidding for contracts, AR5 secured only 3.7 GW of contracts compared to the 10.8 GW in AR4, despite having a similar budget. This was mostly made up of solar and onshore wind.
- 2 GW of solar capacity won contracts for £47/MWh. This is just below the 2.2 GW of solar that secured contracts in AR4.
- 1.7 GW of onshore wind (including remote island wind) secured contracts for £52/MWh. This capacity is a record for onshore wind in the CfD.
- Geothermal power won contracts in the CfD for the first time. The three projects are all located in Cornwall and total 12 MW in capacity (one example is Penhallow). These were awarded contracts from Pot 2 (reserved for newer technologies) alongside 53 MW of tidal stream capacity.
These projects will become operational between 2025 and 2028, with the vast majority coming online in 2027/28.
These results mean more co-located storage is likely on its way
Up to 1GW of storage will come online alongside onshore wind and solar projects from Allocation Round 4 of the CfD scheme. You can read more about this in our deep dive here.
With solar and onshore wind projects dominating Allocation Round 5, we’ll likely see even more co-located battery storage alongside CfD projects - especially since guidance published in May 2023 clarified how it will be treated.