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The Department of Energy Security and Net Zero have released the results of the sixth Contracts for Difference Auction Round (“AR6”).
The Contracts for Difference (CfDs) scheme is a way for developers of renewable energy to undertake large projects with a guaranteed price for the electricity they will generate. Creating a baseline for investment, CfDs were designed to incentivise and reassure developers and maintain lower prices for consumers.
Key takeaways from the AR6 auction:
- AR6 saw £1.5 billion of contracts awarded, including 5GW for offshore wind, 1GW for onshore wind and 3GW for solar
- Represents a success for Government in determining the level of private investment required for clean power projects to succeed
- Offshore wind projects are back on track after no bids in AR5 due to a low strike price
- A record-breaking 115 solar and onshore wind projects, representing quick benefits for consumers
The overall AR6 budget was seven times higher than last year’s failed AR5 auction, giving clean energy developers the opportunity to bid for money from three pots: pot one for onshore wind and solar projects, pot two for emerging technologies and pot three, for offshore wind.
After a ‘disastrous’ fifth round, in which prices were too low to attract any offshore wind bidders, the Government increased pot three by £500 million, making a total £1.1 billion available to offshore wind developers.
And this tactic worked, with the Government proclaiming AR6 “the most successful renewables auction to date”. A record-breaking total of £1.5 billion was awarded to 131 renewable energy projects, which will generate 9.6GW of clean power.
Offshore wind and AR6: back with a bang
AR6 has put the wind back in the sails of offshore renewables. Many more projects are ready to move through the pipeline, including some stalled projects from AR4 that have rebid and won contracts in AR6 at a higher price, finally moving them towards commercial viability.
APEM Group are delighted to have supported five of the fixed offshore wind projects awarded in AR6, including Ørsted’s Hornsea Three, the largest offshore wind farm project in Europe.
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AR6 is a significant success for our valued clients and for our EIA and consenting teams. AR6 is a milestone for the sector, especially after the disappointment of AR5. This investment also represents a validation for APEM Group of our commitment to the offshore wind sector. We are anticipating offshore wind developments to continue at pace and will continue to support a number of these projects as they now progress through the post consent period, managing consent compliance and undertaking key pre-construction studies such as digital aerial surveys for birds and marine mammals, benthic ecology surveys and surveys of terrestrial biodiversity, as they move towards final investment decisions and start to construct.
– Steve Bellew, APEM Group Director, Major Projects
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Floating offshore wind and AR6: an emerging presence
Another winner in AR6 was Green Volt, the largest floating offshore wind project in the world.
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Floating offshore wind unlocks sea that lies further away from the coast, such as the west of Scotland and the west of Ireland, into the deeper parts of the North Sea. The pace and confidence of today’s floating offshore wind developments signposts an exciting future for the offshore wind industry. Floating technology enables deployment in deeper water. Connected to Hydrogen generation or other Power to X technology it offers the potential for far offshore floating wind farms without the need for grid connection, taking advantage of strong, reliable ocean winds.
– Alistair Davison, Managing Director, Marine Science and Development
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Solar and onshore wind and AR6: record-breaking investment
A combined 115 solar and onshore wind projects were awarded in AR6, with a record-breaking 3GW of solar capacity procured. Solar is a technology that can be delivered quickly, alongside immediate benefits for consumers in terms of cheaper bills.
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Solar is a technology that can be delivered quickly, contributing to the UK’s transition to a NetZero economy but its deployment is not without significant challenge. Collaboration between the Government and Industry, as successfully demonstrated by the marked improvement of uptake in the most recent CfD, is crucial to tackle the challenges of public perception, land use and grid management needed to unlock the potential of solar in the UK.
– Jill Simpson, Divisional Director, Environmental Planning
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Innovative Glint & Glare software, developed by APEM Group, alongside robust EIA and LVIA assessments, ensure that developments are made in a in a sustainable and responsible manner with positive outcomes for the environment, while moving the UK and Ireland more quickly towards their net zero goals.
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APEM Group are already a strong presence in the Irish renewable energy market in terms of providing landscape and visual as well as ecology EIA services. This extends to the associated grid infrastructure upgrade development required to bring this widespread renewable energy generation to the consumer. The results of the latest AR6 auction will allow us to confidently expand our service offering within the UK onshore renewables market, bringing a wealth of expertise and experience from across APEM Group.
– Richard Barker, Divisional Director, Landscape Planning
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Emerging projects and AR6: Tidal Stream technology
The UK is a world leader in tidal technology, with just under half of the world’s total capacity in UK waters. 28MW was procured for six new tidal stream projects in AR6, showing the benefits of CfDs in derisking investment in these emerging technologies. AR7 and beyond could see ringfenced investments, to support a growing industry.
AR7 and beyond: what’s next for clean power?
CfDs have enabled and nurtured the UK renewables industry by adding certainty to energy prices. With collaboration from industry and Government, the level of private investment required for clean power projects to succeed has been determined and projects have increased in size, scope and potential power generated.
However, the AR cycle can become an issue for offshore wind developers who can’t always plan on a cycle that matches CFD auctions. Longer term timelines in cycles up to 30 years would enable developers to plan effectively based on the lifecycle of a wind farm. As we saw in AR5, fixed prices don’t always create the value developers need and, in future, the Government might reflect on a more flexible solution, or developers might start to consider the open market.
The challenge now for the industry and for Government will be to continue to increase the pace of deployment of clean power with a diverse energy mix, accelerating to meet 2030 targets and looking beyond to reach longer term targets to decarbonise our energy sector.
As one of the leading providers to the UK renewables sector, APEM Group is delivering integrated data collection and consultancy services that are meeting the challenges the industry faces. We work tirelessly with our clients and Government stakeholders to continue to increase the pace of development whilst ensuring nature positive outcomes and managing impacts on biodiversity and the wider environment.
We continue to invest at pace to develop our market leading offer and broaden the support we are able to offer our clients, and we look forward now to AR7 and subsequent CfD rounds ready to continue to support the industry.
Want to learn more about the clean power projects we’ve worked on so far, or the ways APEM Group supports our renewable energy clients with nature-positive solutions? Simply get in touch with one of our experts.
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