From Capacity to Confidence: The Strategic Significance of AR7

Less than a month after the Department for Energy Security and Net Zero (DESNZ) announced funding for 8.4GW of offshore wind, we now know how funding will be allocated for onshore developments as part of the seventh allocation round (AR7). The breakdown is as follows:

• Tidal - 4 tidal projects (totalling 20.9MW) secured funding.
• Solar – the quickest and cheapest green source of electricity generation – was the clear winner with funding for 4.9GW of funding secured across 157 projects with a strike price of £65.23
• Onshore wind – now treated as an equal to other energy developments in England, following the UK government lifting the de-facto ban, secured funding for 1.3GW across 28 projects. The strike price was £72.24/MWh: an increase from £50.90/MWh which was set in the previous allocation round.
• Scottish projects received funding for 1.4GW of onshore wind, solar and tidal. 

Claire Mack, Chief Executive of Scottish Renewables commented that “Scotland’s onshore wind sector continues to lead the UK market with 1.1GW of projects procured today. This builds on our strong capabilities here in Scotland to deploy onshore wind at a scale that delivers clear benefits for consumers and the wider economy… To build on the success of AR7 across all technologies, we urge the UK Government to remain closely engaged with industry to deliver the solutions that tackle highly volatile network charges to ensure future capacity is secured at best value to consumers.”

Taken together with the offshore wind funding allocation, 14.7GW of capacity was awarded funding making AR7 the largest CfD round to date. 

While this allocation is welcome news for successful developers and supports ambitions to reach Net Zero by 2030, industry players are still grappling with the ongoing uncertainty following the Gate 2 reform process. NESO, the National Energy System Operator – responsible for allocating grid capacity – recently notified Ofgem that it will be unable to meet agreements for 210 of the 340 projects designated as “protected”. This leaves some developers with uncertainty as to when projects can be connected to the grid. 

Regardless of that uncertainty, it is positive that the funding announced for the onshore and offshore wind funding allocation is the largest CfD round to date with 14.7GW of capacity awarded. Successful developers will now need to ensure that they meet any initial conditions precedent and provide a legal opinion to the Low Carbon Contracts Company as part of their CFD requirements.

If you would like any information or advice on the above, then please contact your usual Burges Salmon contact.

This article was written by Stuart West.