LONDON, Jan. 14 (Xinhua) -- The UK government on Wednesday said it had awarded record levels of state-backed subsidies for offshore wind projects in its latest renewable energy auction, as it moves to expand domestic clean power supply and reduce its reliance on fossil fuels.
The Department for Energy Security and Net Zero said around 8.4 gigawatts of offshore wind capacity won support under the government's Contracts for Difference (CfD) scheme, making it the largest offshore wind auction ever held in the UK and in Europe.
Under the CfD system, developers receive a guaranteed "strike price" for the electricity they generate, giving them long-term revenue certainty while shielding them from swings in wholesale power markets. When market electricity prices fall below the agreed strike price, consumers make up the difference through their energy bills, while developers pay money back when market prices rise above the guaranteed level.
In the latest round, strike prices for fixed-bottom offshore wind were set between 89 and 91 pounds per megawatt hour, while floating offshore wind projects secured about 216 pounds per megawatt hour, reflecting their higher costs and earlier stage of development.
These prices represent a clear rise from previous auctions. In earlier CfD rounds, some offshore wind contracts cleared below 60 pounds per megawatt hour, but developers stayed away from the 2023 auction, arguing that support levels no longer matched rising supply-chain and financing costs. The higher prices agreed this year were designed to bring investors back.
To secure more capacity, the UK government also increased the CfD budget for this round to around 1.8 billion pounds(about 2.41 billion U.S. dollars), roughly double the level originally set for offshore wind, and extended typical contract lengths from 15 to 20 years, increasing the scale of its long-term financial commitments.
Once built, the projects are expected to generate enough electricity to meet the annual consumption of the equivalent of more than 12 million homes, although actual output will depend on wind conditions and how quickly the projects are connected to the grid.
The projects are spread across the UK, including large fixed-bottom wind farms such as Dogger Bank South and Norfolk Vanguard off England's east coast, Berwick Bank in Scottish waters and Awel y Mor in Wales, alongside several floating wind projects in the Celtic Sea and in Scotland.
The UK government said the auction could unlock around 22 billion pounds in private investment over time and support thousands of jobs, as developers move the projects toward final investment decisions and construction.
Ministers said the new capacity would help the UK move closer to its goal of largely decarbonising its power system by 2030 while meeting rising electricity demand from electric vehicles, heat pumps and data centres.
However, analysts and opposition politicians have warned that the higher guaranteed prices mean the ultimate impact on household energy bills will depend on future wholesale gas and power prices, as well as how quickly the new wind farms come online. (1 pound = 1.34 U.S.dollars)
