Department for Energy Security & Net Zero
Printable version

Over £1 billion budget for renewable energy auction

Government announces the largest ever budget for the upcoming Contracts for Difference auction round.

  • Renewable electricity auction gets largest ever cash pot to support energy security 
  • £800 million pledged for offshore wind to ensure Britain remains at forefront of technology 
  • budget to boost renewables investment and help UK replace fossil fuels with cheaper, cleaner, domestic energy in the transition to net zero

Britain’s flagship renewables scheme has received its biggest ever funding boost from government, with more than £1 billion for its upcoming auction. 

The budget for the sixth Contracts for Difference (CfD) allocation round – confirmed by the Chancellor at Spring Budget – signals large-scale government backing to drive further investment into the UK’s thriving renewables sector and roll out more clean, secure and affordable energy – while helping grow the economy.

This represents the latest step to deliver the long-term change that Britain needs – to improve economic security and opportunity for everyone – while helping protect families and businesses from volatile global gas prices. It is part of government’s plan to strengthen energy security and bring down energy bills in the long-term. 

Following an extensive review of the latest evidence, including the impact of global events on supply chains, the government has allocated a record £800 million for offshore wind, which has been given a separate funding pot. This makes this the largest round yet, with 4 times more budget available to offshore wind than in the previous round.  

This follows the increase in the maximum price for offshore wind and floating offshore wind in November and will ensure Britain remains a global pioneer in wind power – as home to 5 of the world’s largest offshore windfarm projects. It will also help to deliver the UK’s ambition of up to 50GW of offshore wind by 2030, including up to 5GW of floating offshore wind. 

The CfD scheme gives renewable energy projects a guaranteed price for the electricity they generate, boosting investment in the UK – which has increased renewable electricity generation from 7% in 2010 to over 40% now.   

Since 2010, the UK has seen £300 billion of public and private low carbon investment.  A further £100 billion of private investment is expected for the UK’s energy transition by 2030, which could support up to 480,000 jobs, including 90,000 jobs in the offshore wind sector. 

Separately, the Chancellor has this week confirmed further backing for the UK’s green industries, with an extra £120 million for the Green Industries Growth Accelerator. This takes its total funding to over £1 billion and will boost advanced manufacturing across clean energy supply chains.

Energy Security Secretary Claire Coutinho said: 

When it comes to renewables, we have a record to be proud of. In 2010, just 7% of our electricity came from renewables, this is now up to over 40% today.

We have the second largest renewables capacity in Europe, which is backed by £300 billion of investment since 2010, with £24 billion since September alone.

We are sticking to the plan to deliver the long-term change our country needs to deliver a brighter future for Britain - securing more homegrown, green energy we can protect billpayers from volatile gas prices.

Minister for Nuclear and Renewables Andrew Bowie said: 

This unprecedented renewables budget funding to the tune of over £1 billion will keep the UK at the cutting edge of the industry. 

This announcement will ensure we offer certainty to developers and continue to attract investment in the UK.  

I am excited to see the opportunities that will open for our world-class renewable industries, reducing emissions and delivering reliable clean energy for the British people.

The CfD scheme provides valuable price stability for developers. The 2-way design of the scheme also protects consumers and businesses from future uncertainty on the global energy market. This is because when wholesale electricity prices are higher than the agreed CfD price, generators pay back into the scheme. This was seen over Winter 2022/2023, when CfD payments reduced the amount needed to fund our energy support schemes by around £18 per typical household.  

The Allocation Round 6 budget includes: 

  • £120 million for established technologies such as onshore wind and solar
  • £105 million for emerging technologies such as floating offshore wind and geothermal, including a ringfenced £10 million budget for tidal for a second consecutive year
  • £800 million for offshore wind

CfD contracts are awarded through a series of competitive auctions, which ensure value for money for consumers. This has reduced prices since the first auction and contributed to solar and wind being amongst the cheapest form of electricity generation in the UK. 

The government is making progress on the network reforms announced at last year’s Autumn Statement. This includes offering earlier grid connection dates to projects worth £40 billion, alongside transmission network companies announcing investment plans worth up to £85 billion. From next January, a new process will ensure that only projects which can show progress will be offered a connection date to join the grid. 

A new public register of community benefits for transmission network infrastructure will be published to ensure developers are held accountable for delivering ambitious community benefit packages in local communities where new infrastructure is built. A new taskforce, to be chaired by Rt Hon Julian Smith CBE MP, has also been announced to help un-block disputes between landowners and electricity network operators. 

Neil McDermot, CEO, Low Carbon Contracts Company said:

We welcome the news from DESNZ on the budget for Allocation Round 6 which has a combined total of £1,025 billion across 3 pots. As the private law counterparty for the Contract for Difference scheme, LCCC looks forward to welcoming future projects into its portfolio which currently consists of over 31GW of renewable electricity generation and 240 contracts across 12 technology types. 

The announcement today marks a positive step towards homegrown energy security and economic prosperity. 

We are proud to be playing a part in accelerating the journey to net zero.

Dan McGrail, Chief Executive of RenewableUK said:

We welcome this budget increase, as it recognises that global economic conditions have changed, and it will secure a significant amount of new offshore wind capacity and private investment, as well as creating thousands of new jobs.

Notes to editors 

  • Pot budget estimates, including this year’s £1,025 million budget split across the 3 pots, are presented in 2011-2012 prices, in line with what has been published in the Budget Notice. These figures are:
    • an estimate of annual support in the years following deployment. Actual annual figures will vary over the lifetime of the contract depending on future wholesale electricity prices, and outcomes of the auction process
    • approximately equivalent to around £1,400 million in today’s prices, based on CPI inflation
  • the CfD budget is set based on a wide range of factors, including an assessment of the pipeline of projects that could participate in the auction
  • after all applications have been reviewed, the Delivery Body (National Grid ESO) provides Secretary of State with a valuation of eligible projects. The Secretary of State has the option to revise the budget upwards. This will be between late May and early August
Channel website: https://www.gov.uk/government/organisations/department-for-energy-security-and-net-zero

Original article link: https://www.gov.uk/government/news/over-1-billion-budget-for-renewable-energy-auction

Share this article

Latest News from
Department for Energy Security & Net Zero

Webinar Recording: Derby City Council AI Transformation Showcase Webinar