Offshore Wind in the UK

Current Level

There are currently 9.5GW of operational Offshore Windfarms in the UK with a further 1.3GW under construction (Source: National Grid TEC Register 1st October 2020). The UK has the largest Offshore Wind capacity in the world, accounting for roughly 25% of all installations and upcoming projects (Renewable UK). In Europe, the UK installed capacity equates to roughly 45% of total installations (Germany 34% and Denmark 8% are the next in line[1]). Ownership of Offshore Windfarms are often split between different parties due to the considerable size of the schemes and the complexity and uniqueness of the installation.

Offshore Wind Development

Orsted are viewed as one of the leading Offshore wind developers in the world, and installed the world’s first Offshore windfarm in Denmark in 1991 (a 5MW site at Vindeby, consisting of 11 turbines). Since then, there have been significant improvements in the both the total size of the windfarms and the size of the turbines themselves. Hornsea One (Ortsed) is the largest offshore windfarm in the world at 1.2GW capacity. The individual turbines are 7MW in size and stand at 190m tall.

CfD Auctions

In the UK, Offshore Windfarms have been funded, in part, by government-backed subsidies. The CfD (Contracts for Difference) auction allows developers to bid into an auction, with the lowest priced projects awarded a contract. Developers bid in at a price (£/MWh) that they would be willing to sell the output from their windfarm back to the government. When the project is then built and becomes operational, this auction price is marked against the outturn wholesale price. In this way, the revenue is capped for the windfarm developer at the auction price that they bid in for (if the wholesale price outturns greater than the auction price, then the developer will pay the government the difference between the two prices), however, developers are also protected against price risk (if the wholesale price drops significantly, they will still receive their auction price as the difference between the two prices will be made up by the government)[2].

The most recent auction in September 2019 saw 5.5GW across six Offshore Windfarms projects successfully securing contracts. The auction witnessed accepted auction prices of £39.65/MWh, an almost 30% reduction on accepted prices from the previous auction in 2017, and 66% from the first auction in 2015! This highlights the significant drop in cost of Offshore Windfarms, making it one of the most cost effective generation types in the UK.


[1] https://windeurope.org/wp-content/uploads/files/about-wind/statistics/WindEurope-Annual-Offshore-Statistics-2019.pdf

[2] Developers will still be impacted by negative pricing – as their revenue is capped at the auction price (say £50/MWh), the government will only pay them this value. If prices reach -£49/MWh, the developer will only make £1/MWh; if prices reach -£51/MWh, then the developer will run at a loss of £1/MWh.

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