Wednesday 10 August 2022

The UK’s Contracts for Difference (CfD) scheme has played a key role in developing the country’s offshore wind industry – 65% of operational and EPCI capacity is now supported by a CfD. Under the system, developers are guaranteed a selling price for their power, with the scheme paying out the difference between an agreed ‘strike’ price and the ‘reference’ market price, if the reference price is below the strike price, and the developer paying back into the scheme any amount above the strike price. This provides price certainty for developers investing in offshore wind farms. The scheme’s use of a price competitive auction to award support has also been credited with accelerating cost reductions in the industry to match reducing strike prices.

Following three previous auctions since 2014 which saw prices fall significantly, the industry is experiencing a period of volatility, especially in commodity pricing which has the potential to increase the cost of delivering new projects. Industry experts were closely following the results of the fourth CfD auction; would the scheme remain as popular as in previous years?

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