UK awards record 8.4 GW of offshore wind contracts in policy reset after 2023 flop

On a cold January morning in London, three years after a flagship auction failed to attract a single offshore wind bid, Britain’s energy ministry declared a record-breaking turnaround.

On Jan. 14, the Department for Energy Security and Net Zero announced the results of Contracts for Difference Allocation Round 7, or AR7, awarding long-term contracts for about 8.4 gigawatts of new offshore wind capacity. Officials said the deals are expected to unlock around £22 billion in private investment and eventually generate enough electricity to power the equivalent of more than 12 million homes.

“This is a monumental step towards clean power by 2030,” Energy Secretary Ed Miliband said in a statement, calling the auction “the biggest single procurement of offshore wind energy in British and European history” and claiming it would help Britain “take back control of our energy sovereignty.”

The auction marks a deliberate reset of the United Kingdom’s offshore wind policy after a 2023 bidding round collapsed and developers warned that rising costs and rigid price caps had made the market unworkable. It is also a critical early test of the Labour government’s pledge to decarbonize Britain’s power system by 2030 and reduce exposure to volatile global gas prices.

At the same time, the outcome hands an unprecedented share of Britain’s future offshore fleet to one developer, German utility RWE, and locks consumers into paying for 20-year contracts at strike prices that are higher than today’s wholesale electricity prices but lower than the government’s estimates for new gas-fired power.

A dominant winner

AR7 was split between fixed-bottom offshore wind projects, mostly in the North Sea, and smaller floating wind schemes off Wales and Scotland.

RWE emerged as the overwhelming winner. The company secured contracts for 6.9 gigawatts across five fixed-bottom projects at a strike price of £91.20 per megawatt-hour in 2024 money, indexed to inflation for 20 years. The projects include Dogger Bank South East and Dogger Bank South West off the Yorkshire coast, Norfolk Vanguard East and Norfolk Vanguard West in the southern North Sea, and Awel y Môr off the coast of North Wales.

The fixed-bottom awards also include SSE’s 1.38-gigawatt Berwick Bank B project off Scotland’s east coast, which secured a contract at £89.49/MWh, slightly below the England and Wales price. SSE has said it expects to make a final investment decision on the project in 2027, with other phases of the wider Berwick Bank development to follow in future auctions.

RWE, which has repositioned itself as a major renewables player in Europe, moved quickly to deepen its financial partnerships around the newly contracted projects. The company agreed to sell a 50% stake in Norfolk Vanguard East and West to private equity firm KKR, forming a joint venture to co-develop and co-own the roughly 3.1-gigawatt pair of wind farms. RWE is also developing Dogger Bank South alongside Abu Dhabi’s Masdar and leads a consortium at Awel y Môr that includes German municipal utility Stadtwerke München.

Markus Krebber, RWE’s chief executive, said AR7 had secured long-term offtake contracts for five large projects in “one of our most important core markets” and that partnerships with infrastructure investors allow the company to recycle capital while retaining a central role in development and operation.

Floating into deeper water

While fixed-bottom projects dominated by capacity, AR7 also awarded contracts to two floating offshore wind farms, a technology viewed as essential to tapping deeper waters around the UK.

Blue Gem Wind, a joint venture between Ireland’s Simply Blue Group and French major TotalEnergies, won a contract for the 100-megawatt Erebus project in the Celtic Sea off Wales. The Pentland Floating Offshore Wind Farm north of Scotland, led by Copenhagen Infrastructure Partners, secured a contract for 92.5 MW.

Both floating projects will receive £216.49/MWh in 2024 prices for 20 years, reflecting higher technology and installation costs. The schemes carry significant political and industrial weight: they are backed by public-interest investors including the new state-owned Great British Energy company, the National Wealth Fund and the Scottish National Investment Bank, which the government hopes will anchor supply chains in Welsh and Scottish ports.

Developers and ministers have described Erebus and Pentland as “pathfinders” that should justify upgrades to ports, fabrication yards and specialist vessels, and position the UK as an early leader in floating wind technology.

From failed auction to “stonking result”

The scale of AR7 stands in sharp contrast to Allocation Round 5 in 2023, when no offshore wind projects bid at all. At that time the government had set an administrative strike price of £44/MWh in 2012 prices—roughly equivalent to the lower £60s in today’s money—at a moment when developers were facing steep increases in turbine, steel and financing costs.

Industry figures warned that the failed auction jeopardized the previous government’s target of reaching 50 gigawatts of offshore wind by 2030. It also dented the UK’s reputation among investors following a series of high-profile offshore cancellations in the United States and elsewhere in Europe.

In response, ministers reworked the auction framework in stages. For AR6 in 2024, the Conservative government raised the offshore price cap and budget, resulting in contracts for around 6 GW of fixed-bottom offshore wind and one 400 MW floating project, though analysts said the result still fell short of what was needed.

Ahead of AR7, the current government introduced deeper structural changes. Contract lengths for wind and solar under the CfD scheme were extended from 15 to 20 years, better matching project lifetimes and cutting financing costs. The offshore price cap—known as the administrative strike price—was lifted to the equivalent of £113/MWh in 2024 prices for fixed-bottom projects and £271/MWh for floating.

The government also set aside a dedicated budget pot for offshore wind and increased it late in 2025 to about £1.79 billion to secure more capacity. Planning eligibility rules were eased so that some projects without full development consent could bid if their applications had been accepted more than a year earlier. Floating projects were allowed to be built in phases, which can lower construction risk.

Chris Stark, head of the government’s new Mission Control strategy unit, described the AR7 outcome as “a stonking result,” saying it delivered record offshore capacity “at a competitive price for the consumer” and moved the country toward “clean, secure, energy abundance and less reliance on foreign imports.”

Neil McDermott, chief executive of the Low Carbon Contracts Company, which manages the CfDs, said the results showed the “strength and adaptability” of the scheme in providing certainty for investors. He noted that LCCC will now oversee a CfD portfolio of about 25 GW across technologies over the next two decades.

Bills, budgets and the gas benchmark

Supporters of the AR7 outcome point to comparisons with the cost of new gas-fired power as evidence that the auction represents value for money. The government published analysis suggesting that building and operating new gas plants would cost around £147/MWh under current assumptions, roughly 40% more than the average fixed-bottom offshore wind prices achieved in the auction.

Officials also highlight the way CfDs dampen the impact of gas price spikes by guaranteeing stable revenues for generators and clawing back money for consumers when wholesale prices rise above the strike price. Ministers say the growth of renewables has already reduced average wholesale electricity prices compared with a more gas-dependent system.

However, the strike prices agreed in AR7 are above current wholesale prices in a relatively benign gas market, meaning that in the early years the new contracts are likely to add to the overall support costs passed on to bill payers.

Government documents estimate that the annual budget impact of the new fixed-bottom contracts could rise from about £118.7 million in 2028–29 to around £1.78 billion by 2032–33, assuming all awarded projects are built on schedule. Floating wind support costs would come on top of that.

Opposition politicians and some commentators have warned that the contracts risk increasing so-called green levies on household energy bills and that the power system may struggle to absorb the extra wind output without expensive grid upgrades and storage.

Critics have also questioned whether the auction’s outcome aligns with the government’s framing of “energy sovereignty,” noting that much of the new capacity will ultimately be owned by foreign utilities and financial investors under contracts underwritten by British consumers.

Grid, environment and the 2030 test

Energy system experts say the success of AR7 will depend heavily on factors beyond the auction itself.

National grid infrastructure will have to expand rapidly in the late 2020s to connect new North Sea and Celtic Sea projects to demand centers in England and Wales. The government has created a new National Energy System Operator to plan those reinforcements, but major transmission lines can take close to a decade to approve and build.

Environmental groups have largely welcomed the expansion of offshore wind as essential to cutting emissions but continue to call for careful marine spatial planning to protect seabirds, marine mammals and fishing grounds. The decision to allow some projects to bid before full consent has been granted may concentrate pressure on regulators later in the decade as they weigh climate targets against local impacts.

Even if all AR7 projects proceed and come online between 2028 and 2031, analysts say Britain will still need further large auctions and faster build-out of onshore wind, solar, storage and nuclear capacity to deliver a predominantly decarbonized power system by 2030, the government’s stated goal.

The AR7 auction has, for now, reassured developers that the UK is prepared to adjust policy and pay more for offshore wind than in the recent past. Whether households ultimately see that as a shield against future gas shocks or as an expensive bet on the weather will depend on how prices, politics and construction schedules play out over the next decade.