The latest round of the Contract for Difference (CfD) competitive auctions for new renewable energy projects has led to a major expansion of the UK renewables programme. In January, the Auction Round 7 results for offshore wind were published (AR7), with a record 8.4GW of new offshore wind capacity secured in Europe’s biggest ever offshore wind auction. When installed it will take the UK offshore total to around 25GW. And now the CfD results for the other renewables (AR7a) have emerged - with 4.9GW of new solar and 1.3GW of new onshore wind getting 20-year contracts, up from the existing 21GW of solar and 16GW of onshore wind. AR7a also added 21MW of small tidal stream projects to the 122 MW of existing CfD supported capacity.
In terms of the number of projects, AR7a was the largest CfD round so far, with 157 new solar farms, all but 22 (4.3GW) in England, and 28 new onshore wind farms, 21 of them (over 1GW) in Scotland. They including some very large projects - an 186MW onshore wind farm in Scotland and a giant 480MW series of solar farms at West Burton, near Lincoln. The largest of the 4 tidal stream project is Hydrowing’s 10MW scheme in Wales, its other 2 projects being 5.5MW and 3MW, while Scotland got a 2.4MW Orbital project. All the AR7a green energy projects already have planning permission, although some are still controversial locally.
On the finance side, the government had allocated £310m for AR7a, with onshore wind and solar competing alongside other established technologies in Pot 1. £295m was ear-marked for PV, while Pot 2 got £15m for less established technologies, including tidal stream. The Administrative strike prices were set at £92/MWh for onshore wind & £75/MWh for solar, both in 2024 prices. In the event solar farms won contracts at £65.23/MWh, while onshore windfarms got £72.24/MWh. So they both did well. So did tidal stream, although at a higher cost level- its indicative administrative strike price cap had been set at 371/MW, but the eventual agreed clearing price was 265/MWh – a 29% saving (all of these in 2024 money).
The extension of all the new CfD contracts from 15 to 20 years seems to have helped reduce the costs. And Carbon Brief claimed that, in total, AR7 will cut UK gas demand by around 95 terawatt hours (TWh) per year, enough to cut liquified natural gas (LNG) imports by three-quarters.
Ed Miliband, the energy secretary, was well pleased. He said: ‘These results show once again that clean British power is the right choice for our country, agreeing a price for new onshore wind and solar that is more than 50% cheaper than the cost of building and operating new gas.’ However, the Guardian said ‘the subsidy prices for solar power are slightly lower than last year’s auction when projects were offered £69.76/MWh for their electricity, while onshore wind contracts are slightly higher. In last year’s auction round, onshore wind developers were offered £70.92/MWh’.
The Guardian quoted Simon Virley, head of energy at KPMG UK, who said difference reflected ‘changed macroeconomic conditions & supply chain pressures’, and the auction ‘seems to have revealed a ‘new normal’ for the cost of large-scale onshore renewables.’ So we can ‘no longer bank on prices continuing to fall’. But he said ‘despite this, onshore wind & solar remain the cheapest large-scale renewables available to meet the 2030 target, with prices well below the costs of offshore wind, new build gas or new nuclear.
However, that is not how Shadow energy secretary Claire Coutinho saw it: She said ‘Ed Miliband is loading more and more wind and solar on to the grid before the grid can handle it. The true cost of this power, once you add in network charges and back up is far higher, so all this will do is make our electricity more expensive.’ That is also how the Global Warming Policy Foundation sees it. A new GWPF report says that AR7 CfD will be costly, adding £79 p.a. to household bills. And on top of that it says there will be the extra costs of integrating intermittent renewables into the grid: ‘the cost of grid balancing adds about £20/ MWh to the cost of intermittent renewables and backup from the capacity market about £13/MWh, together adding £33/MWh’.
So it says the full cost of new capacity in AR7 is ‘much higher than gas power, about £127/MWh for offshore wind, £129/MWh for onshore wind and £111/MWh for solar’. And it says ‘these extra costs will only get worse. NESO forecasts balancing costs to rise to £6.4bn–£8.3bn by 2030 and OBR forecasts. Capacity Market costs to rise to £4.4bn per year in 2030/31. We can therefore expect these extra costs of renewables to roughly triple to £11bn–£13bn per year by 2031, or the equivalent of more than £400 per household’.
In stark contrast, the recent assessment by the UK Energy Research Centre claimed that, although electricity bills surged by £169 in real terms between 2021 and 2025, 66% of the increase was due to heightened wholesale gas prices. A further 17% was linked to rising network costs, with just 13% stemming from policy costs, including those designed to support renewable energy initiatives. And the Climate Change Committee says that delivering on net zero is expected to result in costs equivalent to just 0.2 per cent of GDP, while unlocking multiple long-term benefits. Certainly there can be savings: the Energy and Climate Intelligence Unit says that wind power reduced the wholesale price of electricity by up to a quarter (25%) in 2024, equivalent to around £25/MWh.
Evidently there are conflicting views and estimates. DESNZ puts the cost of building and running new fossil gas plants at £147/MWh, much higher than all GWPFs figures for renewables. And clearly DESNZ is in no mood to slow down its green energy efforts. It sees Britain as ‘building clean, homegrown energy at every scale’, with, in parallel with the AR7 results, a new Local Power Plan outlining how ‘a fund of up to £1 billion will enable communities across the UK to own and control their own clean energy projects, building community wealth through the largest public investment in community energy in this country’s history’.
The new plan looks to 1000 community-owned renewable energy and energy storage projects being started up by 2030, led by Great British Energy (GBE), with local ownership of and engagement with projects being seen as key to the successful take up of green energy: ‘this plan is about putting communities in the driving seat of the energy transition, ensuring clean energy is done with communities, not to them, and enabling them to share directly in the rewards’.
Bold stuff, with GBE helping out with finance and advice. And, after a slow start, GBE is also trying to help on the technical logistics side, by eliminating bottlenecks in clean energy system deployment, with a £1bn ‘clean energy supply chain plan’. There is certainly plenty of work to do and these new plans and CfD allocations will create a lot of new jobs - up to 10,000 it’s claimed from just the new AR7a.
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