The UK’s renewable energy sector is supported by Contracts for Difference (CfD), and the 2025 auction round has just delivered what could be one of the most consequential outcomes in the scheme’s history.
Allocation Round 7 (AR7) secured a record volume of offshore wind capacity, sending a clear signal that the UK is serious about rebuilding its clean-power pipeline after the turbulence of recent years. But headline gigawatts only tell part of the story.
To understand what this round really means for energy security, investor confidence, and the 2030 net-zero pathway, we need to look at how AR7 fits into the wider CfD trajectory.
Derisking offshore wind, from bid to build…
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What is Contracts for Difference?
Introduced in 2014, the Contracts for Difference scheme is intended to stabilise power prices and protect British energy producers and consumers from volatile international prices and rising costs.
Following a successful allocation, low-carbon energy generators (including wind, solar, tidal, and theoretically also nuclear) enter into fixed-term contracts, at a set “strike price”, with the Low Carbon Contracts Company (LCCC).
When market prices for energy are lower than the strike price, the LCCC subsidises the generator to help avoid loss of revenue and ensure infrastructure stability; and when prices are higher, the generator pays LCCC the difference.
This in-built stability and implied longevity encourages both domestic and international investment in the UK’s renewables sector. And while it can lead to slightly higher average consumer energy bills, it also protects the same consumers from unexpected price hikes and potential volatility.
As of the end of last year (2025) the scheme had successfully facilitated investments in 39GW of renewable and low-carbon energy projects, and reached 10GW of operational capacity (that’s enough to provide electricity to approximately 15 million homes around the country).
Previous CfD results analysis
So, if CfD contracts are intended to stabilise generation and reduce investment risks, why are electricity prices at an all-time-high in the UK?
We’ve broken down recent Contracts for Difference results in a previous post, but let’s do a quick overview in light of the most recent allocation round. A look back at recent CfD rounds clearly shows the scheme’s swings and what they’ve meant for the UK’s energy transition.
Allocation Round 5 (AR5), which took place in 2023, was a warning. With the government’s administrative strike price cap set at just £44/MWh, the numbers didn’t add up for offshore wind developers. Supply chain and financing costs (including increased insurance rates) left many projects commercially unviable, and the impact was immediate – 2023 saw zero new offshore wind capacity awarded across the country.
This was a dramatic departure from previous rounds, with AR5 being largely marked by solar PV and onshore wind capacity growth. The absence of offshore wind capacity was widely seen as a setback for the UK’s 2030 renewables targets.
In contrast, Allocation Round 6 (AR6) in 2024 was a decisive reversal. With a significantly larger budget and a re-energised approach to auction design, AR6 awarded approximately 9.6 GW of renewables capacity across 131 projects, more than doubling the capacity awarded in the previous round.
AR6 included around 6 GW of fixed-bottom offshore wind and the UK’s first commercial-scale floating offshore wind project (~400 MW) – a milestone for emerging technologies.
Beyond sheer capacity, AR6 reflected improved market confidence with strike prices that came in below administrative ceilings, and the round delivered record solar and onshore wind awards alongside offshore projects.
Taken together, these results highlight how sensitive CfD outcomes are to policy settings and market conditions. AR5’s constrained strike price derailed offshore momentum; AR6’s recalibration helped restore it.
But would the momentum be continued in 2025 for the 7th CfD Allocation Round? Let’s see…
Contracts for Difference Round 7 breakdown
The government announced the results on Jan 14th, 2026.
In what has been labelled as Europe’s “biggest ever offshore wind auction”, Contracts for Difference has awarded a record total of 8.4 GW offshore wind capacity in Allocation Round 5 – marking the largest single offshore wind procurement in both UK and European history.
That capacity is projected to generate enough electricity to power the equivalent of over 12 million homes, unlocking £22 billion in private investment, and supporting thousands of skilled jobs across the country.
- RWE was the dominant winner, securing roughly 6.9 GW of capacity on projects that include Norfolk Vanguard East and West, Dogger Bank South, and Awel y Môr (strike price at £91.20/MWh)
- SSE secured around 1.4 GW for its Berwick Bank B project (strike price at £89.49/MWh)
- Erebus floating offshore wind in Celtic Sea (100MW), adding diversification to the CfD portfolio
The first thing we noticed – aside from the impressive capacity increase – was the strike prices. These are significantly higher than in previous rounds, reflecting inflationary and supply chain pressures. However, they also remain competitive compared with the levelised cost of new gas generation, and are considerably lower than the proxies used by the government for fossil fuel alternatives.
This outcome suggests two intertwined dynamics: AR7 re-centres offshore wind as the backbone of the UK’s renewables pipeline after the blip of AR5 and the recovery of AR6, and shows that investor confidence and competition returned at scale when budget and strike price settings were calibrated to real market conditions.
That said, higher strike prices relative to earlier rounds underline the continuing challenge of balancing cost-competitiveness with delivery risk (a theme likely to shape future rounds and policy debate).
Looking to the future – what do these results mean?
AR7’s record offshore wind awards are a welcome step, but they’re only part of what the UK needs to hit it’s Clean Power 2030 targets.
Government planning documents and NESO modelling set a target range of 43–50 GW of offshore wind by 2030 to underpin a predominantly clean power system. That’s a massive leap from roughly 31 GW either installed or contracted today, meaning the UK must secure at least ~12 GW more across the next CfD round (AR8) to stay on track.
In practice, that means CfD auctions must continue to balance competitive strike prices with realistic cost assumptions, while accompanying grid-build and planning reforms need to accelerate project delivery.
AR7 shows that the UK’s offshore wind engine is back online, but not yet at cruising proper speed. Delivery, not ambition, will now decide whether Clean Power 2030 is met. CfDs can unlock investment, but only if project risk, data quality and execution keep pace.
Turning CfD wins into real-world megawatts…
Securing a CfD is only the first step. NeuWave gives offshore wind developers and investors site-specific wave intelligence that reduces project risk and streamlines decision making – turning awarded capacity into projects that actually get built.
