UK government increases guaranteed price for offshore wind projects by 11%

The UK government has announced an 11% increase in the guaranteed price for offshore wind projects in 2025’s renewable energy auction, as reported by Reuters.

This move is in response to escalating costs driven by inflation and supply chain challenges.

The Labour government is under increasing scrutiny from opposition parties concerning the financial sustainability of its net-zero ambitions, especially following a significant 66% surge in 2024’s auction prices for offshore wind power.

The country has prioritised offshore wind as a central component of its strategy to decarbonise the electricity sector by 2030.

The goal is to increase capacity to between 43GW and 50GW by 2030, up from the current capacity of 15GW.

“Renewable technologies continue to face macroeconomic uncertainty and supply chain constraints – this is particularly true for wind technologies,” the Department for Energy Security and Net Zero (DESNZ) stated in a document published on Wednesday, 23 July 2025.

Britain’s annual renewables auctions are pivotal events in which developers vie for contracts-for-difference (CfD), which secure them a set price per unit of electricity generated.

The CfDs are designed to incentivise investment by ensuring that if market prices fall below this agreed strike price, the government compensates for the shortfall, with the costs eventually recouped through levies on consumer bills.

Conversely, if wholesale prices dip below the strike price, the developers are responsible for repaying the difference.

Offshore wind initiatives have been assigned a strike price of £81 ($109) per megawatt hour (MWh) based on 2012 figures, marking an increase from 2024’s £73 per MWh.

Meanwhile, floating wind projects — which remain at a nascent developmental phase — will see their strike prices rise from £176 per MWh to £194 per MWh.

A spokesperson from DESNZ stated that while these strike prices are preliminary indications, actual auction outcomes could result in lower finalised rates.

The spokesperson stated: “The only way we can get bills down for good and protect families and businesses from volatile gas prices is by moving to a clean power system with homegrown, secure power that we control.”

The application process for the auction named Auctions-AR7 will commence in August 2025 with anticipated announcements between December and February 2026.

In July 2025, the UK government announced updates to the CfD scheme aimed at enhancing renewable energy projects. The revised scheme will feature longer contract durations and updated budget-setting mechanisms.