Offshore Wind Will Dominate 3rd Allocation Round of CfD in the UK

The Department for Business, Energy and Industrial Strategy (BEIS) announced that participants in AR3 would be competing for an annual budget of £60mn, with successful bidders expected to commission in delivery years 2023-24 and 2024-25.

The above chart highlights Cornwall Insight’s assessment of the maximum potential pipeline of capacity, by technology, that could enter AR3. The hatched white box represents the 6GW auction cap, which could be met by offshore wind alone. 

Ed Reed, Head of Training at Cornwall Insight, said: “In capacity terms, offshore wind dominates with it representing just over 7.8GW of the 10GW of all the potential projects that could enter AR3. The remaining technologies representing a small fraction of the pipeline, with remote island wind the next largest by overall project capacity. Cornwall Insight’s initial analysis suggests, that 1.9GW – 3.2GW of offshore wind capacity could be procured in the auction at the current Administrative Strike Price (ASP) levels of £56/MWh (2023-24) and £53 MWh (2024-25).

“Offshore wind has been able to benefit from great leaps in efficiencies with increased turbine size and larger individual projects all helping to boost outputs. As a result, this dominance should be of little surprise particularly when this sector has come out on top in previous rounds. Unfortunately, the scale of the offshore wind sector alongside its relatively low ASP in comparison to other technologies will see other sectors struggle to win a CfD.”