The latest Contracts for Difference (CfD) auction has been deemed a significant success, with over 131 projects securing bids and a combined total capacity of 9.6 GW awarded. Notably, 4.9 GW of this capacity was allocated to offshore wind projects - marking a substantial improvement compared to the complete absence of offshore wind bids in Allocation Round 5 last year.
The CfD scheme, established in 2014, has been instrumental in the significant growth of renewable energy over the past decade, now supplying over 40% of Great Britain’s electricity generation.
A major recent change followed the election of the Labour government, which injected an additional £500 million into this year’s CfD auction. This funding boost, spread across the three technology pots, raised the total AR6 budget to a record £1.5 billion and led to a landmark auction outcome.
Pot Breakdown:
Pot 1: Established Technologies (circa £185m)
A total of 115 contracts were awarded to established technologies, exceeding the 93 awarded projects delivered across all pots in AR5. Scheduled for delivery in 2026 and 2027, these contracts are divided between two technologies: solar and onshore wind.
Solar power was the clear leader, with 3.3 GW of capacity secured through 93 contracts at a strike price of just over £50/MWh - a difference of £3 higher than in AR5. However, there are concerns that the increase in solar capacity will lead to further price cannibalisation during daylight hours.
The remaining 22 contracts were awarded to onshore wind projects, with a total capacity of 1 GW - down from 1.5 GW of capacity awarded in AR5. Many of these projects are located in Scotland, with a few scattered around England - an indicator of the issues with planning permission in the country.
Pot 2: Emerging Technologies (Circa £270m)
A total of seven contracts were awarded, with successful bids for just two technologies: tidal stream and floating offshore wind.
Six tidal stream projects, contributing 28 MW of capacity, secured at a strike price of £172/MWh. This is lower than the outcome of last year’s auction, where 53 MW of capacity was awarded.
The Ynni’r Lleuad 2 scheme, developed by Inyanga Marine Energy Group, was awarded the largest contract, at 10MW. The group also won the largest contract last year.
The remaining contract went to Green Volt, the only floating offshore wind project awarded this round, achieving a strike price of just under £140/MWh. This project is scheduled for delivery in 2028 - and would more than double Europe’s existing capacity.
Despite these successful contracts, there remains a concern about the limited support for projects in this pot. For instance, geothermal energy lacks substantial backing, and hydropower is often overlooked, despite being a proven technology that can deliver intergenerational energy security for the UK.
Pot 3: Offshore Wind (Circa £1.1b)
Offshore wind secured the largest share of capacity among all technologies, totalling just over 4.9GW across nine projects. Of these, only two were entirely new, contributing nearly 3.4GW of capacity expected to be delivered by 2028.
The remaining capacity, around 1.6GW, comes from seven "permitted reduction" projects scheduled for delivery in 2027.
The concept of permitted reduction allows developers with existing CfD contracts to reduce their initial capacity by up to 25% and re-bid that portion as a standalone project to secure a higher strike price.
Geographical and Technological Diversification
AR6 underscored the vital need for alternative low-carbon technologies within the CfD mechanism. While solar and onshore wind currently dominate the renewable energy landscape, there is growing advocacy for including a broader range of technologies, such as tidal energy, geothermal power, and hydropower schemes.
These alternative energy sources offer distinct benefits that enhance grid resilience. Tidal energy, for instance, delivers reliable output thanks to the consistency of tidal patterns, making it a dependable complement to the more variable generation of solar and wind. Similarly, geothermal energy serves as a stable baseload power source due to having a highly predictable and consistent output.
Geographical diversification across the UK is equally vital for optimising grid efficiency. Hydropower schemes, for example, can provide consistent baseload generation in certain regions, which can then be complemented by the intermittent output from solar and wind assets.
This diversified technological profile fosters a more balanced regional energy mix, easing transmission congestion as clean electricity can be distributed locally. With a well-planned strategy backed by CfD support, the UK could significantly reduce transmission costs and enhance overall grid performance.
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