The UK is preparing for the seventh round of Contracts for Difference (CfD) auctions, known as AR7, which promises to be the most ambitious and transformative auction to date. According to Chris Stark, head of the Clean Energy 2030 Mission at the Department for Energy Security and Net Zero (DESNZ), this auction is crucial to address the shortcomings of previous rounds and ensure the country meets its renewable energy targets.

“The consultation for AR7 will begin in the coming weeks. We are focused on making this the most successful auction we’ve ever had,” says Stark. This process, which will allow the participation of projects without full planning permissions and extend the duration of CfD contracts, is designed to unlock new renewable energy capacities and accelerate their deployment.

AR5 and AR6 Results: Lessons Learned

In the fifth allocation round (AR5), results were disappointing for offshore wind, as no bids were approved due to maximum government price caps set below economically viable levels. While other technologies, such as onshore wind and solar photovoltaic, secured significant awards, the lack of offshore projects left major opportunities unutilised to advance capacity targets.

In contrast, AR6 represented moderate progress, although still insufficient to meet industry expectations. According to official data from the Department for Energy Security and Net Zero, the round awarded 3,288 MW in solar photovoltaic energy at reference prices of £50.07/MWh, and 990 MW in onshore wind at final prices of £50.90/MWh, achieving a 20.47% saving against administrative maximum prices. However, for offshore wind, the auction only achieved 35% of the expected eligible capacity, with 3,363 MW awarded at a price of £58.87/MWh. This highlights the urgency of adjusting reference prices and improving auction conditions to maximise the impact of allocated budgets.

AR7: A Radical Shift Toward 2030

AR7 presents a critical opportunity to achieve the ambitious renewable energy targets set by the UK, aiming to implement between 43 GW and 50 GW of offshore wind capacity by 2030.

According to James Brabben, senior regulatory affairs manager at RWE UK, this auction must represent a radical shift in the government’s approach. Brabben emphasises the importance of ensuring that projects ready for execution do not remain “on the table”, especially when time to act is limited.

Among the proposals for reforming the CfD scheme, Brabben mentions the need to increase the duration of contracts from 15 to 25 years, which would align the terms with the project lifetimes, providing greater certainty to developers. It is also crucial to establish clear capacity targets for each auction, offering transparency and stability to investors. Furthermore, adjusting reference prices to reflect real market conditions would avoid underestimates that disincentivise participation from viable projects.

The Economic and Environmental Impact of AR7

Beyond its technical significance, AR7 will have a major impact on the economy and the environment of the UK. An analysis by Aurora Energy concludes that an offshore wind-based system is not only cleaner but also more cost-effective for consumers in the long term. Furthermore, AR7 will unlock essential investments and generate orders in the supply chain, strengthening the UK’s position as a global leader in renewable energy.

“AR7 is not just an auction; it’s a decisive step towards a sustainable future,” concludes Stark, highlighting the government’s responsibility to transform this round into a global reference model. This effort will not only be key to meeting climate and energy goals but also to establishing the UK as a global leader in the transition to cleaner energy.