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The government's ambitious push toward a clean power system by 2030 received a significant boost today with the confirmation that a record-breaking 131 renewable energy projects have secured winning bids in the latest green energy auction round. This marks an important milestone in the transition to cleaner energy, particularly following last year's disappointing auction, which saw no bids from offshore wind developers.
In response to the lackluster results from the previous auction, the former government raised the reserve price, and the new Labour administration followed up by increasing the overall budget by 50 percent to a record £1.5 billion in July. The sixth Contract for Difference (CfD) auction now boasts over 130 successful projects, including nine contracts for new offshore and floating offshore wind farms—making them the first offshore wind contracts awarded since 2022.
In a significant development, developers submitted bids at rates well below the auction's reserve price, allowing the government to secure more projects at a much lower cost to consumers than anticipated. Altogether, 9.6GW of contracts were awarded, including 3.3GW of solar at £50/MWh, 1GW of onshore wind at £50/MWh, 3.4GW of offshore wind farms at £59/MWh, and 0.4GW for floating wind farms at £140/MWh.
Additionally, 1.6GW of contracts at £54/MWh were awarded under the offshore wind permitted reduction regime. This regime allows projects that previously secured CfDs but faced inflationary challenges to re-bid for contracts as independent projects. All clearing prices for these auctions are quoted in 2012 prices for historical comparison.
The results were better than many industry experts had feared, given the increased cost of capital and inflationary pressures on the renewables sector in recent years. While the reserve price for offshore wind had been set at £73/MWh, competitive bidding drove prices down, though not to the record lows of past auctions. Still, these contract prices are far below the cost of the Hinkley Point C nuclear plant currently under construction, reinforcing the case for renewables as a cost-effective alternative.
Proponents argue that these new clean energy projects will enhance the UK's energy security, reduce reliance on gas imports, and help to stabilize energy costs. On the other hand, critics caution that the new contracts could contribute to higher consumer bills if wholesale gas prices drop and remain low over a sustained period.
Among the projects celebrating today's contract awards are Hornsea 3 and 4, poised to become Europe's most prominent and second-largest offshore wind farms, located off the Yorkshire coast. The Green Volt project also secured a CfD, positioning it to become the world's largest floating offshore wind project.
In another breakthrough, six new tidal energy projects were awarded contracts, further solidifying the UK's global leadership in tidal energy. The UK already hosts nearly half of the world's operational tidal stream capacity in its waters, and this auction is expected to accelerate that leadership.
Energy Security and Net Zero Secretary Ed Miliband hailed the auction results as evidence of the government's steadfast commitment to driving investment in the clean energy transition.
"We inherited a broken energy policy, including last year's disastrous auction round, which gave us no successful offshore wind projects," he said. "Today, we have now achieved a record-setting round for enough renewable power for 11 million homes, essential to give energy security to families across the country. It is another significant step forward in our mission for clean power by 2030 - bringing Britain energy independence and lower bills for good.
"These results show that together, this government and the energy industry are securing investment into our country. This auction has produced a record number of solar projects bolstering our mission for a solar revolution; we have powered forward with onshore wind, secured the largest commercial floating offshore wind project in the world, and got the offshore industry back on its feet. As we accelerate our plan for clean power by 2030, the government will work with the industry on how we can build on this success to ensure we can go even further and faster to deliver the power we need."
Energy Minister Michael Shanks said the new contracts would significantly boost the economy. "Securing new wind turbines, solar panels, and cutting-edge technologies such as tidal will boost growth, catalyse investment, and support good jobs across Great Britain," he said. "We've done this while ensuring value for money for billpayers, delivering the biggest auction round to date at competitive prices, helping turbocharge our mission for energy independence and clean power by 2030."
Industry groups warmly welcomed the results, which they predicted would result in a surge of new clean energy investment across the UK.
Emma Pinchbeck, chief executive at trade body Energy UK, said Allocation Round 6 (AR6) "represents a crucial step in the journey to clean power by 2030".
"As we recover from an energy crisis caused by our exposure to international fossil fuel prices, it's more important than ever that we build a clean energy system that can ensure our energy security and protect homes and businesses across the country from unaffordable energy bills," she said. "This is by far the cheapest way to power the UK. Today's record-breaking result shows that the Contracts for Difference programme is once again fit for purpose. Building on AR6's success will mean delivering next year's auction on time and maintaining an auction design that ensures both investor confidence and value for customers."
Dan McGrail, chief executive at RenewableUK, said the results would also bolster the UK's competitiveness as developers seek to attract international investment. "The success of today's auction sends a clear signal that the UK is back in the global race for clean energy investment," he said. "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."
Despite the record number of projects securing contracts in this auction, the total capacity awarded—9.6GW—falls short of the 11GW secured in 2022. This shortfall has raised concerns about whether the current pipeline of projects is robust enough to meet the government's ambitious target of an immaculate power system by 2030.
Additionally, several projects awarded contracts today are expected to encounter planning and grid connection delays, which could further slow progress. These delays underline the challenge of rapidly scaling up renewable energy infrastructure to meet the looming deadline for decarbonizing the UK's power system.
Ami McCarthy, the political campaigner at Greenpeace UK, said the government "clearly needs to take a hard look at how this system is working."
"Five gigawatts of offshore wind is, of course, welcome, but it is only about half of what is required each year to meet the government's 2030 target," she added. "The last renewables contract auction was a catastrophic failure and, in fact, the biggest disaster for clean energy in almost a decade. Because of this, the new government has an uphill battle... This [auction] urgently needs to be followed up with a much bigger auction next year, as well as investment for faster grid connections, better planning, and more storage to hold the green power for when it's needed."
The government today hinted it was continuing to look at how it could accelerate renewables development, stating that "the Energy Secretary is working with the industry to accelerate ways that the Contracts for Difference system and other energy policies can be expanded, so that more renewable energy, including offshore wind, can be connected to the grid, and quicker."
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