Aegir Wavelength: UK offshore wind in focus – Insights from AR6 and lessons from AR5

March 19, 2024
 | 
3 min read
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In the latest Wavelength Intelligence Briefing, Aegir Insights turned its focus to the highly anticipated UK Allocation Round 6 (AR6). Hosted by Darius Snieckus, Chief Executive Editor, with insights from Maria Holm Bohsen, Head of Research, the session unpacked the potential of AR6 to restore confidence in the UK's offshore wind market following the turbulence of AR5.

AR5 challenges cast long shadows

The webinar began by revisiting AR5, a round marked by its lack of developer participation. At the heart of the issue were administrative strike prices (ASPs) set at £44/MWh, which failed to reflect the macroeconomic pressures of rising costs and inflation. As a result, developers boycotted the auction, creating a gap in the UK’s offshore wind pipeline.

AR6: What’s new?

AR6 seeks to remedy these challenges with significant changes, including:

  • Revised price caps: ASPs have been raised by 66% to £73/MWh, offering a more realistic baseline for developers.
  • Increased budget: At £800 million, the budget for this round is the largest ever, with a dedicated Pot 3 allocation for offshore wind projects.
  • 10 GW of eligible projects: Despite this, industry experts anticipate that fewer than half may secure Contracts for Difference (CfDs) due to restrictive assumptions about load factors and government reference prices.

Maria Holm Bohsen highlighted the mixed signals of AR6, stating:

“There are definitely positive steps forward. However, right now, it seems to be the crosswinds that are dominating. The reintroduction of a dedicated offshore wind budget is an important step towards rebooting the sector, but many uncertainties remain.”

Opportunities and Challenges in AR6

The webinar highlighted both the potential and the complexities of AR6 as the UK seeks to recalibrate its offshore wind ambitions:

  • Opportunities:
    • The larger £800 million budget and increased ASPs (up 66% to £73/MWh) signal a renewed government commitment to offshore wind.
    • The reintroduction of a dedicated offshore wind budget in Pot 3 marks an important step toward rebooting momentum in the sector.
    • AR6 provides a platform for innovation, particularly in areas like floating wind technology, which could play a pivotal role in the next phase of growth.
    • Greater focus on infrastructure investments could help alleviate supply chain bottlenecks, enhancing the UK’s ability to meet its ambitious renewable energy targets.

  • Challenges:
    • Restrictive auction frameworks and cautious developer sentiment may limit participation, with fewer than half of the 10 GW of eligible projects expected to secure CfDs.
    • Supply chain constraints, rising capital costs, and inflationary pressures continue to impact the economic viability of projects.
    • Industry stakeholders are calling for greater collaboration between government and developers to address pricing, regulation, and infrastructure gaps effectively.

What’s next for the UK offshore wind sector?

With AR6 outcomes expected soon, all eyes are on the UK to see how the lessons from AR5 have been applied. Success in this round could reaffirm the nation’s position as a global offshore wind leader and lay the groundwork for its ambitious 2030 targets.


Watch the Full Webinar
Missed the live discussion? Gain exclusive insights into AR6 and the future of UK offshore wind by watching the recording.

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Contact

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CVR no.: 39104792

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