The outcome of Allocation Round 6 for the UK’s clean energy mix

This insight looks at the results of Allocation Round 6 (AR6) which is the sixth major auction round for renewables under the Contracts for Difference (CfD) programme.

Insight Author

Joshua Harding-Jones

Senior Consultant

Tel: 02921 508 949

E: josh@hardistyjones.com

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Allocation Round 6 (AR6) is the sixth major auction round for renewables under the Contracts for Difference (CfD) programme. The CfD programme is the UK government’s main mechanism for supporting low carbon energy generation which works by guaranteeing a set price for electricity that generators receive per unit of power output.

The results of AR6 is that 9.6 GW of new clean energy capacity has been procured, with 131 wind, solar and tidal projects set to receive funding.

What energy capacity has been procured through AR6?

England received the majority share of capacity allocated (78%). AR6 marks a significant improvement on Allocation Round 5 – in which no offshore wind projects secured CfDs. The success of the latest allocation is said to be dually attributed to a 50% budget increase and the setting of more market-reflective strike prices.

These changes have resulted in 5.4 GW of offshore wind capacity being allocated, including:

  • East Anglia Two, East Anglia Three, Hornsea 3 and Hornsea 4 in England
  • Inch Cape and Moray West in Scotland
  • Green Volt, in Northeast Scotland, due to be the world’s largest floating offshore wind farm once operational.

What is the potential of Floating Offshore Wind (FLOW)?

The Green Volt allocation is a clear win, as a pathfinder project such as this can help the UK establish itself as a global leader in floating offshore wind (FLOW) and provide the opportunity for supply chains to scale up. However, it is also understood that a number of FLOW test and demonstration  projects were unsuccessful, including some in the Celtic Sea. These early-stage projects support the industry in the development of emerging technologies and provide a level of certainty to supply chains. With fixed offshore wind becoming increasingly established in Scotland and the East of England, test and demonstration projects are particularly important for those regions with ambitions to capitalise on their floating offshore wind potential.

Is Berwick Bank a missed opportunity?

It is very unfortunate that Berwick Bank wasn’t permitted in time for this CfD round, as it would have added an enormous chunk to the Scottish number – delivering an additional 4.1 GW. Whilst it is surely a case of delaying the inevitable, it risks putting supply chain and infrastructure investments back a year or more, which is precious time the industry can’t afford to waste. We really hope Scottish Government give this consent the attention it deserves, as it is a real game-changer of a project. The chart below shows the mix of energy that has been procured in AR6 and shows the potential additional energy that would have been delivered had Berwick Bank been permitted in time to participate in this allocation round.

Figure 1: Results of CfD Allocation Round 6

Has AR6 been a success?

Perhaps the most positive takeaway from the results of AR6 is the demonstrated flexibility of the CfD scheme as a mechanism for supporting private investment in clean energy. The shift from the previous round will have boosted investor confidence in the UK clean energy industry; a welcome move given the inflationary and financial pressures that have hindered delivery timescales of offshore wind projects in recent years. Maintaining investor confidence is essential to project delivery, and critical to the generation of green jobs, both for local communities and across UK supply chains.

Is AR6 a sign of the UK stabilising conditions for clean energy industries straining from unpredictable macroeconomic events? Recent moves from the UK Government would suggest so; the Energy Secretary is working to cooperate with industry through Great British Energy to quicken grid connectivity, and new consenting powers have been granted to the Deputy PM to speed up consenting timelines.

Although an encouraging result, major barriers to securing real economic benefits from clean energy remain. Most notably the UK’s limited manufacturing capabilities and challenges around reskilling and upskilling the workforce.

If you would like to discuss how HJA can provide specialist support to help you deliver robust socio-economic inputs to a major energy infrastructure project, please contact myself or our service lead Stuart Hardisty.