Record levels of clean energy have been secured through the Government’s largest ever funding round for its renewables auction scheme, attracting £17.8bn in investment.
The fourth allocation round for the Contracts For Difference (CfD) scheme delivered almost 11GW of renewables, almost double the capacity achieved in the previous round – enough to power 12m UK homes.
This includes 7GW of capacity from new offshore wind projects, which will increase the country’s overall capacity built and under construction by 35 per cent.
Earlier this year, Downing Street unveiled its supply security, pledging a significant ramp-up in offshore wind, solar, tidal stream, and hydrogen power – as the UK looks to reduce its dependence on fossil fuels and boost its energy independence.
Supply security has become an increasingly important factor after Russia’s invasion of Ukraine, amid concerns of gas shortages this winter if the Kremlin halts flows into Europe.
CfDs aim to give certainty to project developers to invest in new renewable energy infrastructure by protecting them from volatile wholesale prices.
A unique benefit of the CfD scheme is that when wholesale electricity prices are high – as they have been in recent month – generators pay money back into the scheme to reduce the net costs of the scheme to consumers.
The competitive nature of the scheme has continued to place downward pressure on prices – the per unit (MWh) price of offshore wind secured in this round is almost 70 per cent less than that secured in the first allocation round, in 2015.
Overall, 93 projects with existing planning permission across England, Scotland and Wales won contracts through the competitive auction process, which is more than in all three previous rounds combined.
Onshore wind secured almost 0.9GW of new capacity, clearing at a per unit price that was more than 45 per cent lower than it was seven years ago, while solar secured more than 2.2GW.
The two energy sources were also both included in a CfD auction for the first time since 2015.
The fourth round also saw developing technologies tidal stream and floating offshore wind projects successful for the first time.
Tidal stream returned a capacity of 41MW and floating offshore wind returned 32MW.
Following the auction, Business and Energy Secretary Kwasi Kwarteng argued the more cheap, clean power the UK generates, the better protected the country will be from volatile gas prices that are pushing up bills.
Ofgem boss Jonathan Brearley has warned prices could climb to £2,800 per year this October, while energy specialist Cornwall Insight has forecast energy bills could rise to over £3,000 next January.
He said: “These energy projects already have planning permission, now they have a funding contract in place. We’re going to these projects built as soon as possible to better protect millions of British families from rising costs.”
RenewableUK’s Deputy Chief Executive Melanie Onn praised the latest funding round, convinced it would enhance the country’s supply security.
She said: “The cost of living crisis and the war in Ukraine have pushed affordability and energy security to the top of everyone’s agenda, with billpayers desperate for relief from fossil fuel price hikes. Today’s record-breaking auction results show that there is a way to replace unaffordable gas with low-cost clean power generated by a wide range of renewable technologies led by wind, both offshore and onshore.”
The industry body previously revealed the UK has 86GW of offshore wind power in various stages of conception, planning and construction.
Following the latest funding round, the price of new offshore wind power has fallen to new record lows of £37.35 per megawatt hour of electricity, the latest government auction for renewable contracts shows.
The offshore wind prices are set for contracted projects, which will begin generating in financial year 2026/27 – reflecting attractive market conditions for the sector.