The 2019 round of UK Contracts for Difference (CfDs) marks an era of subsidy-free offshore windfarms with 6 GW of new capacity. Strike prices came in at £40/MWh, significantly below the government’s £49/MWh wholesale market price.
This is the third auction for offshore wind to be held in the UK and prices continue to plunge below forecasts from £120/MWh in 2015, £57/MWh in 2017, and now £40.
We’re truly at the inflection point where renewables become cheaper than fossil fuels. In the CfD agreements, projects are paid the difference between a fixed strike price and the reference wholesale price. When the strike price is below the reference price, the developer pays back the difference, reducing consumer bills. Where the strike price is greater than the reference price, the developer receives a subsidy, paid for by consumers.
Six offshore wind allocations were made on 20th September 2019, three of which make up Doggerbank, an interconnected wind hub in the North Sea. Doggerbank, a joint venture between SSE and Equinor, will be the world’s largest windfarm, with a combined capacity of 3.6 GW, equivalent to the electricity supply for 4.5 million UK homes
|Project Name||Capacity||Strike Price (£/MWh)||Delivery Year||Homes Powered|
Beck A P1
|Doggerbank Creyke Beck B P1||1200||41.6||2024/25||1,505,330|
|Doggerbank Teeside A P1||1200||41.61||2024/25||1,505,330|
|Seagreen Phase 1||454||41.61||2024/25||569,520|
|Sofia Offshore Wind Farm Phase 1||1400||39.65||2023/24||1,756,220|
The CfD allocation is great news but we recognise the challenge this will bring to the supply chain to support the cost pressures. We don’t under-estimate the important role we play in supporting our clients across the full project life cycle to try and ensure the best value for money and reducing costs where possible.
— Donna Ellcock, Director Offshore Wind Contract, at Taylor Hopkinson.
According to Carbon Brief analysis,
…prices are so low that the windfarms could generate electricity more cheaply than existing gas-fired power stations as early as 2023.
Sources & Further Reading
New windfarms will not cost billpayers after subsidies hit record low (The Guardian)
Analysis: Record-low price for UK offshore wind cheaper than existing gas plants by 2023 (Carbon Brief)
Contracts for Difference (CfD) Allocation Round 3: results (Gov.uk)