Offshore Wind Costs

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The UK government has increased the strike price caps for the upcoming Contracts for Different round and committed to an offshore wind-only pot.

The Administrative Strike Price for fixed-foundation bidders in Allocation Round 6 will be £73 per megawatt-hour, up 66% on the £44/MWh in AR5 that failed to attract any entries.


By Paul Homewood

Following the news that offshore wind prices will rise to over £100/MWh in the next round of CfDs, it is worthwhile recapping what we are currently paying existing wind farms.

The older wind farms, which are covered by ROCs, are currently paid a subsidy of £125/MWh, on top of the market price for the electricity they produce, which was £96/MWh in September. In September therefore we paid a total of £221/MWh. ROC account for about a half of total generation.

Newer wind farms are paid via CfDs. Theses guaranteed strike prices vary from one wind farm to another, but in September the average was £176/MWh.

There are of course a couple of offshore generators which have refused to trigger their CfDs at the low prices they originally agreed to, and these receive the market price instead.

CfD strike prices are guaranteed and index linked for 15 years, so even the oldest projects will still be subsidised well into the 2030s.

Based on current market prices, we are paying a total annual subsidy of £4.8 billion to offshore wind, on top of the wider system costs. With a government offshore target of 50GW capacity by 2030, this subsidy will rise to over £11 billion a year.