The year 2025 will be a turning point for the UK energy sector. With the launch of the AR7 auction, the largest and most ambitious to date, and the implementation of the Clean Power 2030 Action Plan, the British government aims to consolidate its transition to a power system based on renewable energy and nuclear.

According to Kumara Rathnam, Senior Analyst at Veyt, who shared his insights with Strategic Energy Europe, these changes have the potential to unlock critical investments and accelerate the deployment of projects in both wind and solar energy. “AR7 will be a crucial moment, as it introduces key reforms aimed at reducing costs and speeding up the development of renewable projects,” Rathnam states.

A New Push for Offshore Wind Energy

Offshore wind energy has achieved significant milestones in the UK, with 14.8 GW operational and 16 GW under construction or contract. However, the 2023 AR5 auction was marked by the absence of bids, raising concerns within the industry.

To reverse this trend, the government has introduced reforms to the Contracts for Difference (CfD) scheme, the most important support mechanism for developers. The most significant changes include:

• Relaxing eligibility criteria, allowing projects without full planning consent to participate.
• Revising reference price parameters, ensuring greater transparency in bidding.
• Assessing a possible extension of the CfD contract term, lowering financing costs for developers.

“The goal is clear: to expand offshore wind capacity to between 43 and 50 GW by 2030,” Rathnam asserts. “To achieve this, the government needs to secure at least 12 GW in the upcoming auction rounds (AR7, AR8, and potentially AR9).”

Expectations are that AR7 will mark a turning point in the UK’s offshore wind growth, enabling the viability of new wind farms and unlocking investments in infrastructure.

Solar Energy: Opportunities and Challenges Amidst Rapid Growth

The solar sector has seen unprecedented growth. With an installed capacity reaching approximately 20 GW in 2024 and a projected 50% increase for 2025, solar energy is becoming a key pillar of the UK’s energy mix.

Government support has been instrumental. Under the leadership of Ed Miliband, Secretary of State for DESNZ, three major solar projects have been granted Development Consent Orders (DCOs) at an accelerated pace, alongside the relaunch of the Solar Taskforce. According to the Clean Power 2030 Action Plan, the UK aims to achieve 47.4 GW of solar capacity by 2030.

However, the sector’s rapid expansion faces several challenges:

1. Grid stability: The integration of intermittent generation requires investments in storage and transmission.
2. Supply chain constraints: The growing demand for solar panels and components may cause bottlenecks.
3. Planning and financing barriers: Large-scale projects face local opposition and high costs.

To sustain this growth, the government could introduce adjustments to CfD contracts, allowing more flexible conditions for solar projects and reducing investment risks. The Solar Taskforce is expected to publish its Solar Roadmap soon, detailing strategies to address these challenges.

The Central Role of AR7 in 2025

The AR7 auction has become the focal point of the UK’s energy policy this year. Beyond boosting wind and solar energy, the redesign of the CfD scheme aims to attract more participation and facilitate access to developing projects.

“CfDs have evolved into the primary support mechanism following the phase-out of previous subsidies such as ROCs,” Rathnam explains in his interview with Strategic Energy Europe. “They reduce revenue uncertainty for developers and lower financial risk, which is crucial for attracting investment.”

The reforms introduced in AR7 seek to prevent the issues seen in AR5 and ensure that the renewable sector continues its expansion. The auction will define much of the capacity to be installed in the coming years, and its success will be critical in meeting the 2030 targets.

A Defining Year for the UK Energy Transition

2025 will be a milestone year for the transformation of the UK’s energy sector. With an unprecedented expansion of wind and solar energy, CfD reforms, and an AR7 auction that could unlock record capacities, the country finds itself at a crucial moment to meet its climate targets.

However, success will depend on the effective implementation of these reforms and continued government support to mitigate challenges related to infrastructure, financing, and regulation. “If the UK successfully executes its strategy, it will not only meet its 2030 targets but also cement its position as a global leader in renewable energy,” Rathnam concludes in his analysis for Strategic Energy Europe.