UK sets budget of over GBP 1bn for CfD auction

As part of its Spring Budget, the UK government today set the budget for the contracts for difference (CfD) allocation round 6 (AR6) at over GBP 1 billion (USD 1.3bn/EUR 1.2bn), the largest ever budget for a single round.

According to the AR6 budget notice, the funding envisaged for supporting offshore wind, Pot 3, is GBP 800 million. Of the overall budget, GBP 120 million is allocated to established technologies, such as solar and onshore wind, in Pot 1, and GBP 105 million to emerging technologies, such as floating offshore wind and geothermal, in Pot 2.

Commenting on the announcement, Sam Hollister, Head of Energy Economics and Finance at consultancy LCP Delta, said: “The government will hope that this budget, larger than any previous budget, will be enough to deliver sufficient offshore wind investment to meet the government’s 50 GW target by 2030. LCP Delta analysis expects the GBP 800 million dedicated to offshore wind could likely procure approximately 4-6 GW in the upcoming auction. This is certainly a welcome development given last year’s failed auction. However, it may not be enough to get the UK back on track with time running out to build the additional 23 GW needed by 2030.”

The Association for Renewable Energy and Clean Technology (REA) welcomed the increase in the CfD budget but said it is disheartened by the lack of sector-wide measures in the Spring Statement.

“In particular, the Chancellor had promised the sector a response to the US investment in green supply chains and manufacturing at the last fiscal event and to see very little once again on how we can ensure the UK does not miss out on the vital green jobs and investment up for grabs is very disappointing," said Frank Gordon, Director of Policy at REA.

The Chancellor of the Exchequer Jeremy Hunt announced a GBP 270 million joint investment in green aircraft and automotive technologies and an increase of GBP 120 million to Green Industries Growth Accelerator fund to support clean energy supply chains across the UK.

The REA also appreciates the 12-month extension on the levy on the profits of North Sea oil and gas companies.

The Marine Energy Council (MEC), meanwhile, welcomed the continuation of the tidal stream ringfence at GBP 10 million in this year’s renewable auction. As the budget for Pot 2 of the CfD round has been substantially increased from GBP 35 million in 2023 to GBP 105 million in 2024, there is potential for tidal stream to access more funding than the ringfence, it added.

A timeline for the auction can be found at the AR6 microsite.

(GBP 1.0 = USD 1.272/EUR 1.170)

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