UK freezes CfD AR8 strike prices at AR7 level

The UK government has published the statutory notices for the upcoming Allocation Round 8 (AR8) of its Contracts for Difference (CfD) scheme, which include keeping the administrative strike prices (ASPs) unchanged compared to the previous AR7.

The government said this reflects its focus on competitive price outcomes in this year’s auction.

The details set out in the statutory notices also include the round’s pot structure.

There will be five pots, including for solar, for onshore wind and remote island wind, for offshore wind, and for floating offshore wind and other deepwater offshore wind. The latter is a new technology for the auctions, which will have the same ASP as floating wind. The fifth pot will be for less-established technologies, such as geothermal, anaerobic digestion and landfill gas.

Derby anaerobic digestion plant Image: SevernTrent

The UK government has previously confirmed it would have visibility of anonymised bids for solar, onshore wind, including remote island wind, and offshore wind in AR8. This has now been extended to floating offshore wind and other deepwater offshore wind bids. Bid visibility will not cover the fifth pot.

There will be separate clearing prices for offshore wind based on where projects connect to the grid.

It will confirm the budget for AR8 after applications have been assessed.

Commenting on the publication of the AR8 framework, Kisha Couchman of Energy UK said:

“The previous allocation round revealed the record-breaking scale of private investment waiting to be deployed in the UK, and AR8 is another opportunity to build on that success. If AR8 repeats that GBP 22 billion achievement, both households and investors will feel the benefit of the clean energy projects that will follow.”

“Despite an increase in construction costs for all infrastructure projects, a strong AR8 will help drive down energy bills for customers, as well as provide confidence for developers, investors and supply chains to invest, innovate and support thousands of good jobs across the UK,” Couchman added.

Ana Musat (left) and Kisha Couchman

RenewableUK’s Executive Director of Policy Ana Musat welcomed the clarity provided by the AR8 parameters.

“The fact that the Administrative Strike Prices remain at the same level as the last auction will enable developers to bid competitively, whilst accounting for the cost pressures which the industry is facing. We’re also pleased that the Government has accepted our recommendation to offer additional delivery years to some technologies, as this reflects the growing complexity of building major infrastructure projects,” she added.

Musat also noted that the previous auction secured a record amount of offshore wind capacity and that eligible capacity for AR8 is double the amount that won contracts in AR7. 

Jess Ralston, energy analyst at the Energy and Climate Intelligence Unit (ECIU), observed:

:"Every solar panel or wind turbine we install means we're less reliant on gas which will increasingly come from the likes of Trump as the North Sea continues its inevitable decline with or without new licenses."