Higher CfD strike price will ‘restore confidence’ in offshore wind

Confidence in the UK’s offshore wind sector will be restored by the increase in the Contracts for Difference (CfD) strike price.

That is the reaction to the UK government’s 66% increase in the offshore wind strike price cap in the next CfD auction.

The administrative strike price – the maximum amount generators will be paid per megawatt hour (MWh) – has increased from £44 to £73 (2012 prices). It follows a disappointing auction round this year, which attracted no bids from offshore wind developers.

Sam Richards, founder and campaign director for pro-growth campaign group Britain Remade, said: “I am pleased ministers and mandarins have now seen sense and increased the price for next year’s offshore wind auction.

“Even with this increased price offshore wind is still much cheaper than gas, meaning millions of households up and down the country can benefit from one of the cheapest sources of energy.

“Thanks to the Contract for Difference system the offshore industry has been able to drive down costs. But offshore wind could be made even cheaper by slashing red-tape, tackling bureaucracy and reforming our outdated planning system which means it can take up to 13-years for a new offshore wind farm to be completed despite constructing the actual turbines only taking two years.

“Hopefully this news will restore confidence in the offshore wind sector and Britain can once again secure billions in investment and see vital jobs created.”

Other technologies have also seen an increase in their strike price caps, including a 52% uplift for floating offshore wind to £176/MWh.

As reported by Utility Week last month, energy secretary Claire Coutinho had promised that the next CfD allocation round (AR6) would be competitively priced to attract bids from offshore wind developers.

Announcing the changes today (16 November) she said: “The UK is home to the world’s five largest offshore wind farms projects.

“Today we have started the process of our latest Contracts for Difference auction for renewables, opening in March next year. We recognise that there have been global challenges in this sector and our new annual auction allows us to reflect this.

“This is a vital part of our plan to have enough homegrown clean energy, bringing bills down for families and strengthening our energy independence.”

Jess Ralston, energy analyst at the Energy and Climate Intelligence Unit, added: “The government appears to have learned its lesson and listened to the wind industry’s calls for higher contract prices that reflect real world inflation, in no small part fuelled by the gas crisis.

“This is a significant step along the road to restoring investor confidence in the UK’s offshore wind market. But whereas the UK has previously led, many Asian and other countries around the world are now building offshore wind to boost energy security and cut emissions, so we increasingly find ourselves in a competition for investment.

“The Autumn Statement provides an opportunity for the chancellor to show that the top politicians, including the prime minister, see the opportunity net zero offers and are willing to back key green industries like offshore wind.”

The government was heavily criticised for failing to alter its AR5 strike price despite warnings that it was unfavourable for offshore wind bids.

Despite the criticism government has repeatedly claimed that the latest auction was a success, with energy minister Graham Stuart labelling it as a “triumph,” despite the complete absence of offshore wind bids.

To read Utility Week’s analysis of the last CfD auction, click here.