Today (3 September), the Department of Energy Security and Net Zero (DESNZ) has released the results of the sixth Contracts for Difference (CfD) auction round.
Auction round six (AR6) was allotted the highest-ever budget for a funding round, reaching a total £1.5 billion after the Labour government announced a £500 million increase on 30 July. After what energy secretary Ed Miliband called a “disastrous” fifth auction round (AR5) when no offshore wind was awarded, this year saw a total £1.1 billion available for offshore wind developments.
Alongside the pot three budget for offshore wind, pot one’s budget, allocated to established technologies and awarded to solar PV and onshore wind projects, was over £185 million. Pot two, which emerging technologies could bid for, had a budget of £270 million available.
Pegged as the government’s most successful renewables auction to date, AR6 awarded a record 131 clean energy projects with a combined total capacity of 9.6GW, almost three times the awarded capacity in the previous auction round (3.7GW).
A combined total capacity of 6GW of offshore wind projects (excluding floating offshore wind) has been awarded. 1.6GW of that offshore capacity went to developments that won in previous allocation rounds rebidding.
Strong market engagement meant competitive price discovery led to clearing prices for solar PV, onshore wind and offshore wind being awarded at over 18% below their administrative strike prices.
Hailing AR6’s success, energy secretary Ed Miliband said: “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.”
Offshore wind wins
It would have been difficult not to paint any AR6 result that saw some offshore wind capacity awarded a success. The strike price for offshore wind developments that had won contracts in previous auction rounds was £54.23/MWh, and for new offshore wind contracts it was £58.87/MWh.
Headlining the projects awarded this year, Ørsted’s Hornsea 3 offshore wind power plant re-bid and was awarded 1,080MW. Its Hornsea 4 project bid in for the first time, receiving a 2,400MW CfD. DESNZ called the developments, situated off the Yorkshire coast, “Europe’s largest and second largest” wind farms. Ørsted claims that Hornsea 3, with a 2,400MW capacity, is the largest globally.
A 73.5MW CfD was awarded to Ocean Winds, a 50/50 joint venture from EDP Renewables and ENGIE, for its Moray West offshore wind development.
According to Cornwall Insight analysis, AR6 brings the estimated total capacity built or contracted to be built under the CfD (or previous schemes) to an estimated 28.6GW. However, this remains well below the target set by the new Labour government as part of its ambition to quadruple offshore wind capacity by 2030—based on Cornwall Insight figures, this would sit around 5.5GW.
Pot 2: emerging technologies
Floating offshore wind secured 400MW in AR6, all awarded to one project: the 560MW Green Volt project, developed by Flotation Energy and Vårgrønn, a joint venture between Plenitude and HitecVision, Cornwall Insight called it the world’s largest floating offshore wind project.
Due to the relative newness of the technology, floating offshore wind had a strike price of £139.93/MWh. For tidal stream technology, paid from the same pot, the strike price sat at £172/MWh, down by 13% on AR5.
In the previous auction round, tidal energy was awarded 53MW worth in contracts, which is far above this year’s result of 28MW, split across six projects. The biggest capacity awarded was 10MW to Ynni’r Lleuad 2 scheme from HydroWing in Wales. It was also the only tidal stream project not based in Scotland to win a contract.
The first stage of Ynni’r Lleuad also won a contract last year, again the largest tidal stream project to be successful.
Edinburgh-based tidal power specialist Nova Innovation had several projects awarded CfDs. Its OCEANSTAR (Ocean Subsea Tidal Array) project will have a total installed capacity of 10MW and secured, across two separate bids, a collective 2MW.
The OCEANSTAR project will be implemented under the European Marine Energy Centre’s (EMEC) site-wide licence for the Fall of Warness, delivered in collaboration between Nova Innovation and EMEC.
Nova’s other tidal stream project awarded in AR6 was the SEASTAR (Sustainable European Advanced Subsea Tidal Array), securing a 4MW contract. Like OCEANSTAR, it will be situated at the EMEC’s Fall of Warness near the Orkney Islands.
Interestingly, AR5 awarded contracts to geothermal projects for the first time in the scheme’s history, something that has not been repeated this year.
Solar PV and onshore wind
Solar scored 3.3GW capacity in AR6, making it one of the most successful technologies to enter. According to Cornwall Insight, this is the result of a strong pipeline of assets across many Great British regions and its competitive edge over onshore wind.
Further, Solar PV achieved a strike price of £50.07/MWh, above the prices achieved in both AR4 (which was £45.99/MWh) and AR5 (which was £47.00/MWh, the maximum allowable price for the auction). Notably, despite its offshore wind failings, AR5’s outcome was positive for the solar industry: 56 solar projects were secured, with a total capacity of just over 1.9GW.
EDF Renewables’ Longfield Solar Energy Farm, a nationally significant infrastructure project (NSIP) with 400MW generational capacity that secured a development consent order (DCO) in June 2023, won 299MW in AR6.
This was the highest capacity awarded; the smallest capacity awarded was 8MW to Burton Top Farm, being developed by Boultbee Brooks.
Last year, Low Carbon welcomed the AR5 results, having been offered CfDs for 10 solar projects with a capacity of more than 350MWp. In AR6, it won six projects with a combined capacity of just over 180MW.
Onshore wind has been a focal point of the Labour government’s policy. The government was hailed for its decision to remove the de facto ban on onshore wind for England within its first week in power.
However, the effect of this will not yet be evident in the CfD auction results, because to qualify for the auction a project must have been consented and be able to provide a target commissioning date. Since 2015, stringent planning rules in England and Wales have made this near impossible; as such, the next auction round (AR7) is likely to see an increase in onshore wind (not located in Scotland).
Of 22 onshore wind projects awarded CfDs, 18 sites were in Scotland, three in Wales and just one in England. Infinergy’s Alaska Wind Farm, in Dorset, was awarded 8MW. The total capacity awarded to onshore wind projects was 1GW, a decrease from AR5’s 1.5GW (again, primarily in Scotland).
The strike price for onshore wind, £50.90/MWh was only slightly lower than AR5 but significantly higher than AR4’s price of £42.47/MWh. According to Cornwall Insight, this is reflective of rising trends in development costs. Further, the relatively low capacity of onshore wind that secured contracts meant only the cheapest and most competitive sites were successful.
The future outlook
Energy minister Michael Shanks said: “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.
“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.”
However, as pointed out by Tim Dixon, a senior consultant at Cornwall Insight, there remains a “significant gap” between contracted capacity and the amount needed to achieve the government’s targets for 2030.
Dixon added: “Renewables projects take years to build and become operational and there is just five years left to achieve a decarbonised electricity grid. With AR7 expected to open to applications next March, the government must focus on enabling more projects to secure planning permission and grid connections to ensure a credible and sufficient pipeline for future development.”
Thus, while AR6 may have been the most successful auction round to date, the only way forward is up.
