The UK government has increased the maximum price for offshore wind projects in its flagship renewables scheme.

Following an extensive review of the latest evidence, including the impact of global events on supply chains, the government has raised the maximum price offshore wind and other renewables projects can receive in the next Contracts for Difference (CfD) auction to ensure it is performing effectively.

Photo: Nicholas Doherty

The CfD scheme ensures renewable energy projects receive a guaranteed price from the government for the electricity they generate. The maximum strike price has been increased by 66% for offshore wind projects, from £44/MWh to £73/MWh, and by 52% for floating offshore wind projects, from £116/MWh to £176/MWh ahead of Allocation Round 6 (AR6) next year.  In AR6, offshore wind will also be given a separate funding pot in recognition of the high number of projects ready to participate.

The UK government is also increasing maximum bid prices for other technologies, including tidal by 29% – from £202/MWh to £261/MWh3.

Cost of building wind farms has soared

This increase in prices comes after an auction for offshore wind projects failed to attract any bids, with firms arguing the price set for electricity generated was too low.

Companies have said that the cost of building wind farms has soared because of rising inflation and interest rates, while the maximum price they can charge for the electricity they generate has been relatively low.

Energy firms have told the BBC that electricity produced out at sea would remain cheaper and less prone to shock increases compared with power derived from gas-fired power stations.

The technology has been described as the “jewel in the UK’s renewable energy crown”, but firms have been hit by higher costs for building offshore farms, with materials such as steel and labour being more expensive.

Claire Coutinho, the energy security secretary, said: “We recognise that there have been global challenges in this sector and our new annual auction allows us to reflect this. This is a vital part of our plan to have enough homegrown clean energy, bringing bills down for families and strengthening our energy independence.”