The dust is settling following the awards of Contracts for Difference in allocation round 7 for offshore wind in January and now onshore clean power technologies in February. It’s time to grab a cup of tea and digest the results – or maybe pop a cork and pour a glass of champagne for the winners!
The Contracts for Difference scheme was introduced by Electricity Market Reform in 2014. Since then, fixed price contracts for the supply of low carbon energy have been awarded in seven allocation rounds, with the latest AR7 and AR7a contracts having been awarded early this year.
This year saw 14.7 GW of clean power awarded CfDs across Great Britain bringing the total volume of clean energy CfDs awarded to almost 53GW since CfDs began. January saw a biggest in Europe allocation of 8.4GW of CfDs to fixed bottom and floating offshore wind projects in AR7 shortly followed in February a biggest ever auction allocation of 6.2GW to onshore technologies including solar, wind and tidal stream.
What is a Contract for Difference?
CfDs is the Government’s main mechanism for supporting low carbon electricity generation. It does this by giving fixed price certainty – something of benefit to both developers and consumers. For developers, it offers price certainty of a long period of time and can be used to support investments in both established and new technology. For consumers, it gives certainty of price for electricity generated by projects awarded a CfD.
The contract essentially works as a hedge against wholesale market volatile pricing by awarding projects a strike price per megawatt hour (MWh) of electricity generated. To the extent that the market price realised is less than the awarded CfD strike price, then generators’ revenue is topped up to the strike price. To the extent that the market price realised is greater than the awarded CfD strike price, then generators pay back excess revenue.
For example, in the imaginary scenario below, with a strike price of £80, generators would need to pay back amounts equal to the areas in blue and would receive price support for the area in purple.
In each auction round, generators submit sealed bids for their capacity and cost, and contracts are awarded in order of lowest cost first until a capacity cap or budget threshold is met.
What’s new in AR7?
Compared to earlier allocation rounds, AR7 saw changes to CfDs including an extended term from 15 to 20 years to improve project economics, offshore wind eligibility to bid without their main planning consent, partial visibility of offshore wind bids to maximise budget deployment, an extension of the target commissioning window for solar projects from 3 to 12 months to give greater flexibility, and a 36% increase in the total budget.
What were the results?
A total of 201 projects were awarded CfDs for 14.7 GW of capacity to be delivered between 2027 and 2031. Excluding the nascent technologies of tidal stream and floating offshore wind, the strike prices achieved for onshore wind, offshore wind and solar were all below the £147/MWh cost of building a new gas fired power station.
| £/MWh (2024 prices) | Projects | Capacity | |
| Solar PV | £65.23 | 157 | 4.9 GW |
| Onshore Wind | £72.24 | 28 | 1.3 GW |
| Tidal Stream | £265.00 | 4 | 20 MW |
| Offshore Wind – England & Wales | £91.20 | 9 | 6.9 GW |
| Offshore Wind – Scotland | £89.49 | 1 | 1.4 GW |
| Floating Offshore Wind | £216.49 | 2 | 192 MW |
Broken down between England, Wales and Scotland we have:
| England | Scotland | Wales | |
| Solar PV | 4247 MW | 331 MW | 327 MW |
| Onshore Wind | 28 MW | 1093 MW | 185 MW |
| Tidal Stream | – | 2.4 MW | 18.5 MW |
| Offshore Wind | 6090 MW | 1380 MW | 775 MW |
| Floating Offshore Wind | – | 92.5 MW | 100 MW |
| TOTAL | 10.4 GW | 2.9 GW | 1.4 GW |
Check out our interactive map to see the locations of all the winning onshore projects.
The biggest winners include:
- RWE securing 7.2 GW of CfDs with 6.9 GW offshore and 290 MW onshore
- SSE has secured its first CfD on its 4.1 GW project at Berwick Bank which has the potential to be one of the largest offshore schemes in the world
- Foresight has landed CfDs for its 480 MW Nationally Significant Infrastructure Project at West Burton
- Imerys Wind Farm in Cornwall which secures a CfD for the largest onshore wind project in England to be successful in an auction for a decade
Where does this take us on the road to Clean Power 2030?
The UK’s Labour Government is currently pursuing the Clean Power Action Plan defining key targets for 2030 to move Great Britain to produce enough clean power to meet its annual demand.
The key targets for 2030 and progress to target in 2024 include:
- Clean sources produce at least 95 per cent of Great Britain’s generation (73.8 per cent in 2024);
- Clean power sources produce 100 per cent of the power Great Britain consumes in total (63.6 per cent in 2024); and
- Carbon emissions intensity of Great Britain’s electricity generation is well below 50g CO2 per kWh by 2030 (105g CO2 per kWh in 2024).
On a technology-by-technology basis, the UK Government is seeking up to 43-50GW of offshore wind, 27-29 GW of onshore wind and 45-47 GW of solar capacity by 2030. This auction adds 3.3 GW of offshore wind, 1.3 GW of onshore wind and 4.9 GW of solar capacity due to be delivered by the end of 2030 – a total of 9.5 GW.
The UK Government remains of the view that the 2030 Clean Power targets remain on track and that the AR7 results has materially supported these targets. However, with grid connection delays, potential supply chain constraints, and general construction risk, delay, workforce and skills shortages, achieving the 2030 Clean Power targets will require risk mitigation for ready and timely deployment.
What happens next?
Congratulations if your project was allocated a CfD! Whilst there’s time for a big sigh of relief and a moment to celebrate, the CfD timeline continues…
Here’s the immediate next steps:
- Successful projects will now receive a Contract for Difference offer from the Low Carbon Contracts Company (the CfD scheme administrator) within 10 business days.
- There’s then a 10-business day window to review and accept the Contract for Difference by returning a countersigned contract.
- We’re then onto satisfying the Initial Conditions Precedent (including delivery of a legal opinion, KYC and descriptions of the facility) within 20 business days of the date of the CfD Agreement (or 40 business days after the date of award).
If you need support with your award and CfD Agreement or a legal opinion to tick off the Initial Conditions Precedent, then get in touch with your Birketts team.
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The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at February 2026.