United Kingdom

United Kingdom

UK opens ‘landmark’ renewable energy CfD auction with no cap on offshore wind

No limits on offshore wind capacity eligible for support in the UK’s biggest ever renewable energy tender

Offshore wind is due to receive the majority of annual payments in the UK's fourth CfD round (pic credit: RWE)
Offshore wind is due to receive the majority of annual payments in the UK's fourth CfD round (pic credit: RWE)

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The UK government has launched its fourth and largest-to-date round of contracts for difference (CfD) support for renewable energy, offering £285 million* (€335 million) a year to secure 12GW of green capacity across Great Britain. 

A wide range of renewable energy technologies including onshore and offshore wind are eligible to bid for funding in the scheme’s auction process. 

“This is set to be a landmark auction securing the largest amount of new renewable energy capacity so far, as ministers have listened to our calls for the overall capacity cap to be lifted to reflect the enormous appetite among companies and investors in UK projects,” said RenewableUK CEO Dan McGrail.

He said he expected more than 16GW of wind to compete, with investment in this round potentially topping £20 billion. 

Offshore wind is due to receive the majority of annual payments, with £200 million/year earmarked for fixed-bottom projects, and an initial £24 million/year for floating offshore wind. There is no limit on how much offshore wind capacity – floating or fixed-bottom – could be awarded.

The CfD model is credited with boosting offshore wind deployment and driving down prices. The price per unit of offshore wind fell by around 65% between the first allocation round in 2015 and the third in 2019, according to the UK’s department for business, energy and industrial strategy (BEIS).

The UK has a target to achieve 40GW of installed offshore wind by 2030, with 1GW to come from floating projects.

“The CfD’s fourth round can support the effective development of open and competitive supply chains and promote innovation and skills in the low-carbon electricity generation sector,” said energy and climate change minister Greg Hands.

Onshore wind and solar will be competing with hydropower for a total pot of £10 million/year for 5GW maximum of capacity, and an individual cap of 3.5GW. 

Tidal stream projects follow right behind floating offshore wind with £20 million/year, in line with the government’s efforts to support “innovative technologies that can make an important contribution to the UK’s decarbonisation commitments,” BEIS explained.

The CfD fourth allocation round will close to applications on 14 January 2022, with the final results of the auction expected to be announced by the summer of 2022.

* The funding is in 2011/12 prices. Actual annual figures will vary over the lifetime of the contract depending on future wholesale electricity prices, and outcomes of the competitive auction process.

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