The UK Government have significantly increased the strike price they will offer for floating offshore wind projects in the next Contracts for Difference (CfD) auction, following the lower-than-expected offshore wind allocation in the previous auction, and the impact of global events on supply chains. This amounts to a 52% increase from £116/MWh to £176/MWh. Marine Power Systems supports the changes to the CfD process, and this is very welcome news for the sector.
Developers are paid a flat indexed rate for the electricity they produce that represents the difference between the ‘strike price’ and the ‘reference price’. CfDs incentivise investment in renewable energy by providing developers of projects with high upfront costs and long lifetimes with direct protection from volatile wholesale prices, whilst also protecting consumers from paying increased support costs when electricity prices are high.
This move represents a big step in the right direction when it comes to delivering on the UK target of 50GW of offshore wind by 2030, with 5GW of that target delivered through floating offshore wind. It will help create confidence in the sector and broader interest in the CfD process. Increased competition will stimulate demand, encourage technology development and drive energy transition, whilst also reducing the price of energy for consumers.
The forthcoming round of CfD (AR6) is due in March next year. Whilst there will be a dedicated funding stream for offshore wind there is no indication yet of what the final budget will be. We are looking forward to further announcements around budget allocation and how this will fill the gap created by the previous funding round (AR5).
Our floating platform technology, PelaFlex, is well suited to the UK environment and supports the rapid deployment of industrial scale floating offshore wind whilst maximising local content delivery through existing supply chain.