Results of the 6th round of UK CFD allocations announced, with record support for renewables.

Results of the CFD allocation round (AR) 6 was announced on 3 September 2024, with a total of 9.6 GW of CfDs awarded. The latest round was significantly more successful than the previous AR5 (more than twice as much capacity awarded and is the most successful round to date) following an increase in administrative strike prices and budget (see our previous note here for more details), but AR7 will need to go much further to meet the government’s net zero emissions targets by 2030.

Here is the list of people who successfully qualified for AR6:

Technology	Quantity (GW)	Strike price (£/MWh) (2012 prices)	Year of delivery
Photovoltaics	3.29	50.07	2026-8
Onshore wind	0.99	50.90	2026-8
Tidal current	0.03	172	2028-9
Floating wind on the sea	0.4	139.93	2028-9
Allowable offshore wind power reduction	1.58	54.23	2027-8
New offshore wind energy	3.36	58.87	2028-9

Onshore solar and wind energy

The record installed solar capacity of around 3.3GW will increase the UK’s current installed capacity by 20%. The awards for onshore solar and wind, along with other Government actions such as the lifting of the ban on onshore wind in planning policy and the granting of planning permission for three large-scale solar power plants (read more here), demonstrate the Government’s commitment to achieving its targets of tripling installed solar capacity to 50GW and doubling installed onshore wind capacity to 35GW by 2030. Grid connections will remain a key issue for new projects until significant upgrades to the national grid infrastructure and interconnection reforms are implemented (read more here).

Floating wind on the sea

This auction round sees the first floating offshore wind farm awarded a CfD contract. Green Volt Offshore Windfarm has been awarded a CfD contract for its 400MW project and is targeting first power in 2029. Green Volt is expected to supply electricity to oil and gas platforms and the UK grid, enabling the full retirement of existing offshore power generation and contributing to the North Sea Transition Deal’s objectives of using low-carbon electricity to power offshore oil and gas facilities. The award of the CfD contract is the first step towards the Government’s ambitious target of 5GW of floating offshore wind by 2030, but a significant increase in AR7 awarded capacity will be required to get close to achieving the target given the project’s timelines.

Steady wind on the sea

Compared to the previous AR5, where no bids were submitted for offshore wind farms, the AR6 results represent significant progress for offshore wind. However, while a total of close to 5 GW of permanent offshore wind capacity was awarded, four of the offshore wind CfD awards (totalling 1.6 GW of capacity) relate to permitted reductions for projects that have previously been awarded CfDs, so this is not entirely new capacity.

These projects were awarded CfDs in the previous round (AR4) and were subsequently selected to reduce the capacity subject to these CfDs due to cost increases that made the projects uneconomic at the AR4 strike price. The CfD allows for up to 25% of the project capacity to be withdrawn and such capacity to be re-listed in a subsequent CfD round. Inch Cape A & B, Moray West, East Anglia 3 and Hornsea 3 did so and increased their strike price for re-listed capacity from £37.35/MWh in AR4 to £54.23/MWh in AR6.

The new offshore wind projects awarded CfD contracts include Hornsea 4 and East Anglia 2. They have a combined capacity of 3.36 GW and secured a strike price of £58.87/MWh, significantly below the administrative strike price of £73/MWh set by the Government in the parameters of the round.

Much more offshore wind capacity is needed in AR7 if there is any hope of meeting the government’s net zero emissions targets. Energy UK has previously estimated that AR6 and AR7 CfD auctions combined will need to secure 21GW of offshore wind capacity for the UK to meet its target of 50GW of offshore wind by 2030. Regen has estimated that there are around 8-12GW of CfD-ready fixed offshore wind projects that could potentially bid in AR7, but this would still leave a significant gap in the 2030 offshore wind target even if all of these projects were to receive CfDs in the next round.

Moving forward

The success of this round should be encouraging for investors looking to develop renewable energy projects seeking CfDs and demonstrates a renewed commitment to renewable energy development in the UK.

Not all of the challenges facing the industry can be solved with a higher strike price and larger auction budget. Issues such as supply chain bottlenecks and long delays in the planning and grid connection process are having a significant impact on new renewable projects. All are on the radar of the new government and it remains to be seen whether significant changes will be implemented in time to significantly impact AR7 (and potentially AR8), but the results of AR6 are a good start for the new government in its first 60 days.

For more information please contact:

Kate Laidlow-Singh, Herbert Smith Freehills

[email protected]