Contracts for Difference AR7 offshore wind budget lower than AR6

The budget sets out the ceiling for the total amount of support that each technology pot under the CfD can receive for the valuation years, based on a series of forecasts and assumptions. Pot 3 outlines the maximum support for offshore wind technologies, while Pot 4 is exclusively for floating offshore wind. In AR7, the Government has set aside £180 million for floating offshore wind and £900 million for offshore wind.

The Department for Energy Security and Net Zero (DESNZ) will announce the budgets for other technologies over the next couple of months.

Implications for potential capacity awarded

The AR6 auction gave contracts to over 4.9GW of capacity for offshore wind. The Government’s decreased budget in AR7 could result in less capacity secured, although this will depend on factors including strike price and market reference prices. This is because the CfD budget is based on a series of assumptions. The strike price is the competitively set CfD award price for each technology, set by the auction run by NESO. The market reference price is based on forecasts of market prices, which NESO uses to assess the cost of the contract for budgetary purposes. Other factors such as capacity of the asset being awarded a contract and assumed generation load factors also contribute to the calculation. Regardless, the administered strike price (ASP) has grown from £73/MWh (almost £102/MWh in 2024 prices) in AR6 to £113/MWh in AR7: a 10.8% uplift. The ASP sets the maximum price that it’s possible to award in the auction.

Previously, the Government recognised that it needed to secure more than 12GW across AR7, AR8 and potentially AR9 to meet its Clean Power 2030 (CP30) target. This means the next two Allocation Rounds will play a crucial role in achieving CP30. However, with a reduction in budgetary ambition for AR7, there’s a highly likely risk that the UK could miss its CP30 offshore wind target of 43-50GW.

AR7 timeline and next steps

The timelines for offshore wind and all other technologies are separate for AR7. Generators in Pots 3 and 4 will make their sealed bids for the auction between 11-17 November. On 14 January, DESNZ will publish a final budget for offshore wind following the outcome of the auction. For all other technologies, DESNZ will release the Contract Budget Notice between now and the first week of December. It should publish results for all auctions by the first week of February 2026. At that point, we’ll know the cleared strike prices and auction outcomes for each technology pot.

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