The results of the seventh auction round of the Contracts for Difference (CfD) scheme are keenly awaited by the solar industry. The offshore wind element of the round was revealed on 14 January. The most critical change from previous rounds is a move from 15 to 20-year contracts, intended to further solidify renewables’ bankability and lower auction prices, while maintaining rates of return for investors.
With that in mind, factoring in a healthy solar project pipeline and the budget announced last year, Solar Energy UK anticipates that the auction process will deliver a strike price for solar power of £63-68 per megawatt-hour, in 2024 prices. That would be a discount of 9-16 percent on the £75 cap on bids imposed by the Government last year (the administrative strike price).
The trade association understands that around 6 GW of capacity is eligible to bid. However, some developers will opt for other financial arrangements, namely selling power to major customers through power purchase agreements or to the grid directly, as merchant plants.
It anticipates that the round will deliver between 3.5 GW and 4.5 GW of solar farms over 2028 to 2031 – roughly equivalent to powering 1.5 million homes annually.
The UK now has around 24GW of solar capacity overall, with about 14 GW coming from ground-mounted projects. Together with rooftop solar, almost 4GW was installed over 2025 alone – a record amount – with another 4 GW of solar farms currently under construction. Submissions and approvals are also running at record highs.
Combined with rooftop projects, merchant plants and those with power purchase agreements, 3.5-4.5 GW under CfDs is broadly in line with the amount the UK needs to meet the goal of reaching 54-57 GW by 2030, as set in the Clean Power 2030 Action Plan. That includes the 9-10 GW of rooftop systems that the plan anticipates, beyond its headline figure of 45-47GW.
The prevailing average capacity of winning solar projects in previous rounds has been 35 MW, which would indicate that around 100-130 solar projects would secure a CfD this time. However, the rising number of projects of nationally significant scale (over 100 MW, formerly over 50 MW) expected to be in the running this time would indicate a lower number of individual projects will win.
The wholesale cost, or more formally the ‘Intermittent Market Reference Price’, averaged £80.66 last year. A lower strike price should therefore result in solar farm operators being paid significantly less than the going rate, saving consumers millions of pounds a year.
“We have stressed for years that solar farms are the cheapest source of power” said Chris Hewett, Chief Executive of Solar Energy UK. “The forthcoming auction results should directly lower consumer bills, delivering more clean, green, secure and homegrown energy, free from geopolitical turbulence.”
The key function of CfDs is to reduce the risk of volatile prices hitting consumers and damaging investor confidence. It thus lowers the cost of capital and in turn energy bills, while the clean generation it secures helps push expensive natural gas off the grid.
The system uses competitive bidding to keep down the cost of support for renewable energy, with operators being paid a fixed amount regardless of the prevailing price for wholesale power. When wholesale electricity prices are below the agreed strike price, operators receive top-up payments from consumers. When wholesale prices exceed the strike price, operators pay the difference back, reducing the ‘policy costs’ applied to bills.
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