CfD Auction: Offshore Wind Subsidy Falls By Three-Quarters In Two Years

The results of the UK's second CfD auction have caused quite a stir. And for once, the headlines don't do full justice to the underlying story.

Offshore wind for 2022/23 secured two CfD contracts for difference at a strike price of £57.50 (in 2012 prices). Given that the lowest strike price for offshore wind in the first CfD auction was £114.39, this represents almost exactly a halving of the price in just two years – a near vertical descent in the price of offshore wind. While this price decline looks astonishing, it is only half the story – the decline in subsidy costs is even greater. The market price fluctuates currently within a range of about £40-45 per MWh. A strike price of £57.50 represents an average subsidy of around £15 per MWh, while £114.39 represents a subsidy of around £70-75 per MWh. Therefore, while prices have been cut in half, the subsidy cost is less than a quarter of the subsidy cost only two years.