UK beefs up price it is prepared to pay for offshore wind

Two documents published by the Department for Energy Security and Net Zero on 23 July 2025 set out new parameters for the upcoming Contracts for Difference (CfD) auction round, Allocation Round 7 (AR7), which is due to be launched in August.

The overall budget for the auction has yet to be announced, but the most important feature of the announcement is that offshore wind administrative strike prices have again been increased, having also been increased in the previous allocation round, AR6, after the disastrous Allocation Round 5 in 2023, which drew zero bids. For AR7, the so-called strike price for fixed offshore wind has been increased to £113/MWh (US$153M); the strike price for floating wind has risen to  £271/MWh, in 2024 prices.

Responding, RenewableUK executive director, policy and engagement Ana Musat said, “We are pleased to see that the parameters set out by the government for this year’s auction are more reflective of market realities than in previous years. 

“This creates an opportunity to attract record levels of investment into this allocation round: up to £53Bn in private investment could be secured this year to deliver vital new offshore wind projects, which will strengthen the UK’s energy security significantly.” As highlighted by OWJ, following other changes announced by the government, more than 20 GW of offshore wind is eligible to bid into this year’s auction – more than our entire current operational offshore capacity.

“While wind energy projects haven’t been immune to the inflation and supply chain pressures facing all major infrastructure projects, they remain cheaper than other forms of electricity generation such as new nuclear and new gas plants, so they offer the best value for money for billpayers,” said Ms Musat. “It is also worth noting that, due to competition in auctions, strike prices are likely to end up being lower than these maximum administrative strike prices (ASPs) set out by the government, which act as a consumer backstop.

“It makes sense that we are seeing higher ASPs for AR7, which reflect cost increases impacting all infrastructure sectors. But higher ASPs do not mean the auction will clear at these prices, they merely give investors more headroom for devising highly competitive bids and act as a backstop for consumers. With the level of competition we are seeing in this auction, and as previous years have shown, we will likely see strike prices come in below ASPs. This year, more realistic technology load factors will also mean the final budget can go a lot further in procuring capacity.

“As well as the more realistic ASPs and load factors, we welcome the introduction of a separate pot for floating wind in this auction. With the UK in a race to lead the world in developing floating wind components and expertise, it is vital that we unlock investment in more test and demonstration projects as soon as possible, as this will enable us to scale up this innovative technology faster.”

Ms Musat said parameters published on 23 July 2025 also clarify that the government will be clearing Scottish offshore wind projects at different prices to those in the rest of the country, recognising the increased costs they face for transmission charging and avoiding having to uplift strike prices for all projects to this level.

Also responding to the publication of parameters for the CfD AR7, Scottish Renewables chief executive Claire Mack said, “The parameters for this year’s clean power auction are a promising step forward to build much needed momentum behind Scotland’s impressive pipeline of clean energy projects. 

“The CfD scheme plays an essential role in strengthening the UK’s energy security by enabling the growth of our homegrown supply of clean energy, attracting billions of pounds worth of private investment every year. This is the pathway to job creation and more consistently stable prices for households. 

“It is right the scheme continues to evolve so that it can respond to the inflation and supply chain pressures facing all major infrastructure projects. We continue to encourage the UK government to engage closely with industry on future design of the scheme.

“Scotland is at the heart of the drive to clean power with new economic opportunities for the taking. The introduction of a separate clearing price for fixed bottom offshore wind projects in Scotland will help capture these opportunities and deliver better value for consumers.

“An ambitious budget will be needed to ensure this year’s full potential can be maximised. Next steps must also include the design of an enduring solution to transmission charging, as part of wider strategic planning of our energy system, to create the fairer system we need.”