Of the total capacity awarded under the AR7 auction round, 8.2 GW went to fixed-bottom offshore wind projects, with a further 192.5 MW allocated to floating offshore wind. The auction attracted intense competition, reflecting both the maturity of the UK market and renewed confidence following changes to CfD parameters aimed at restoring project viability.  

German utility RWE emerged as the dominant winner in AR7, securing nearly 6.9 GW of capacity across several major projects. These included the 3 GW Dogger Bank South development off the coast of Yorkshire and the 3.1 GW Norfolk Vanguard project off East Anglia. Both schemes rank among the largest offshore wind farms globally.

RWE also secured a 775 MW CfD for Awel y Môr in the Irish Sea. The project is notable as the first Welsh offshore wind development to win a contract in more than a decade.

SSE Renewables secured a CfD for Phase B of its Berwick Bank project in the North Sea, with a capacity of 1.4 GW. Berwick Bank is being developed in three phases and, at a total planned capacity of 4.1 GW, is expected to become one of the world’s largest offshore wind farms once fully built.

Two floating offshore wind projects also secured CfDs, albeit at a smaller scale – Blue Gem Wind’s Erebus project in the Celtic Sea (100 MW) and Copenhagen Infrastructure Partners’ (CIP) Pentland development in Scotland (92.5 MW).

According to WindEurope, AR7 was among the most competitive offshore wind auctions ever held in Europe. ‘A record 19 projects with a total potential capacity of 24 GW were eligible to bid,’ the industry body said. It added that this competition resulted in strike prices for fixed-bottom offshore wind of £91.20/MWh in England and Wales, and £89.49/MWh in Scotland. The strike price for floating offshore wind was significantly higher, at £216.46/MWh, reflecting the earlier stage of commercial maturity for the technology.

WindEurope emphasised the cost competitiveness of the results, stating: ‘With these results offshore wind once again proved to be one of the best value options for European households and industry.’ It noted that AR7 prices were around 40% lower than the cost of building and operating new gas plants in the UK, estimated at £147/MWh, and almost 30% lower than new nuclear, at around £124/MWh. The organisation estimated that electricity generated by the 8.4 GW of new offshore wind capacity would save bill payers nearly £1.7bn/y compared with gas-fired generation.

The Energy and Climate Intelligence Unit (ECIU) also said its analysis showed wind’s impact on wholesale power prices. It said the average day-ahead electricity price last year was around £83/MWh but could have reached £121/MWh without the contribution of wind generation, which reduces the role of gas-fired power plants in setting market prices.  

The UK government expects the capacity secured under AR7 to generate enough electricity to supply the equivalent of around 12 million homes. Ministers also pointed to wider economic benefits, including around £22bn in private investment and support for an estimated 7,000 jobs.

The Contracts for Difference (CfD) scheme is the government’s main mechanism for supporting low-carbon electricity generation. It guarantees renewable energy developers a set price per MWh for the electricity they produce – known as the strike price. When the strike price is higher than the market price, the government-owned Low Carbon Contracts Company subsidises the developer. When the market price is higher than the strike price, the developer pays back into the public purse.

Linking the auction results to longer-term system needs, the government cited forecasts from the National Electricity System Operator (NESO) that electricity demand will more than double by 2050. Offshore wind, alongside solar and onshore wind, is seen as central to the government’s Clean Power 2030 Action Plan, which targets 95% of UK electricity generation from clean sources – including renewables, nuclear and battery energy storage systems – by 2030, with unabated gas used only ‘when essential’.

According to Offshore Energies UK (OEUK), following the AR7 awards, the approved offshore wind project pipeline now totals around 38.4 GW, including projects in operation and under development. The UK has set a target of 43–50 GW of offshore wind by 2030.

Further CfD capacity awards for other renewable technologies, including onshore wind and solar PV, are expected to be announced next month.

In 2023, the AR5 auction attracted no successful bids from offshore wind developers, with the industry blaming the government for setting maximum strike prices that were too low to cover rising supply chain costs. As a result, the government increased the strike price by 66% for offshore wind projects, from £44/MWh to £73/MWh for the following round (AR6), and by 52% for floating offshore wind projects, from £116/MWh to £176/MW.  

Industry reaction

Industry reaction to the AR7 results was broadly positive, albeit tempered by calls for continued system reform.  

OEUK Energy Policy Director Enrique Cornejo commented: ‘Today’s awards are an important step for the UK’s power ambitions.’ However, he stressed that ‘getting projects to final investment requires a joined-up approach across planning, grid, infrastructure, market design, and they should prioritise the domestic supply chain’. Cornejo also warned that the UK would still need continued investment in homegrown gas and gas generation infrastructure to provide dispatchable power, and described transmission charges as ‘a significant issue directly affecting competitiveness and investment decisions’.

Octopus Energy CEO Greg Jackson also welcomed the new capacity but argued that lower consumer bills would depend on wider reforms. He said the projects would ‘add significantly more wind to the grid in sensible locations’ but called for urgent action to ‘reassess all infrastructure plans and assumptions, cancel unnecessary projects, and reform the electricity market to reduce wasted wind and avoid wasteful expenditure on unnecessary new infrastructure’.

From a technology and innovation perspective, ORE Catapult CEO Steve Foxley said AR7 had delivered greater pipeline certainty but warned that the UK would also need a ‘laser like focus on innovation’ to maximise the benefits of offshore wind. This included accelerating turbine manufacturing, extending the life of existing assets and adopting smarter approaches to operations and maintenance.

See also this week’s Comment on the AR7 auction results from Simon Virley CB FEI, Vice Chair and Head of Energy and Natural Resources at KPMG