UK CfD Allocation Round 6 results announced with record support for renewables

The results of CfD Allocation Round (AR) 6 were announced on 3 September 2024, with a total of 9.6GW of capacity being awarded CfDs. The latest round has been much more successful than the previous AR5 (it awarded more than double the amount of capacity and is the most successful round yet) following the raise in administrative strike prices and increased budget (see our previous note here for more details) but AR7 will need to go much further to meet the government's net zero 2030 targets.

Successful applicants in AR6 include:

Solar & onshore wind

The record c.3.3GW of solar capacity secured will increase the UK's current installed capacity by 20%. The solar and onshore wind awards demonstrate, along with other government actions such as removing the ban on onshore wind in planning policy and the granting of planning permission to three major solar plants (see more here), the government's commitment to reaching its targets of tripling solar capacity to 50 GW and doubling onshore wind to 35GW by 2030. Grid connections will remain a significant issue for new projects until significant upgrades to the national grid infrastructure are made and connections reforms are implemented (see more here).

Floating offshore wind

This auction round sees the first floating offshore wind farm being awarded a CfD. Green Volt Offshore Windfarm was awarded a CfD for its 400MW project and is targeting first power in 2029. Green Volt is expected to deliver electricity to oil & gas platforms as well as the UK grid, allowing the full retirement of existing offshore power generators, and contributing to the North Sea Transition Deal goals of using low carbon electricity to power offshore oil & gas facilities. The CfD award is a first step towards meeting the government's ambitious target of 5GW of floating offshore wind by 2030 but there will need to be a significant increase in capacity being awarded in AR7 to get anywhere close to meeting the target given project lead times.

Fixed offshore wind

Compared to the previous AR5, in which no offshore wind farms bid, the AR6 results represent significant progress for offshore wind. But, whilst close to 5GW of fixed offshore wind capacity was awarded in total, four of the offshore wind CfDs (totalling 1.6GW of capacity) awarded are for permitted reductions for projects previously awarded CfDs so are not entirely new capacity.

These projects were awarded CfDs in an earlier round (AR4) and subsequently elected to reduce the capacity subject to those CfDs due to cost increases making the projects unviable at the AR4 strike price. The CfD permits up to 25% of a project's capacity to be withdrawn and for such capacity to be rebid in another CfD round. Inch Cape A & B, Moray West, East Anglia 3 and Hornsea 3 have done this and increased their strike price for the rebid capacity from £37.35/MWh in AR4 to £54.23/MWh in AR6.

The new offshore wind projects awarded CfDs are Hornsea 4 and East Anglia 2. They have a total capacity of 3.36GW and secured a strike price of £58.87/MWh, well below the £73/MWh administrative strike price set by the government in the round's parameters.

Much more offshore wind capacity is needed in AR7 if there is any hope of meeting the government's net zero targets. Energy UK have previously estimated that the AR6 and AR7 CfD auctions will together need to secure 21GW of offshore wind for the UK to hit the target of 50GW of offshore wind by 2030. Regen has estimated that there are c.8-12 GW of CfD-ready fixed offshore wind projects which could potentially bid in AR7, but that would still leave a significant gap in the 2030 offshore wind target even if all of those projects were awarded CfDs in the next round.

Going forward

The success of this round should give confidence to investors looking to develop the pipeline of renewable projects bidding for CfDs and demonstrates a renewed commitment to renewables in the UK.

Not all challenges the industry faces can be addressed by a higher strike price and bigger auction budget. Issues such as supply chain bottlenecks and lengthy delays in the planning process and obtaining grid connections are having a significant impact on new renewable projects. They are all on the new government's radar and it remains to be seen whether significant changes will be implemented in time to make a significant difference for AR7 (and potentially AR8) but the AR6 results are a good start for the new government in its first 60 days.