Comment

Record low price for offshore wind in CfD round 3 auction

The Department for Business, Energy and Industrial Strategy (BEIS) this morning revealed the results of the UK government’s third Contracts for Difference (CfD) auction round.

Commenting, Shimeng Yang, Wood Mackenzie Senior Research Analyst, said: "The record low strike prices of between £39.65 – £41.611 MWh (in 2012 prices) is equivalent to a delta of £44.95 - £47.18 /MWh if indexed to 2019 prices. This is comparable with expected annual average wholesale prices of approximately £45/MWh in 2019 in the UK.

"The UK government expects a negative notional budget impact of deploying offshore wind based on their reference price. The actual CfD top-up payment will be determined by the wholesale power price over the next 15 years. However, we expect this would lead to a positive gain for the UK government.

"The upcoming UK CfD round 4 discussions will now go beyond the budget allocation. They will focus on capacity caps to ensure competitiveness, as well as volumes needed to reach the 30GW offshore wind target by 2030. Furthermore, the declining UK offshore wind strike prices will force developers to prepare for bids below current power prices or to follow a pure merchant route to market."

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