Energy UK Explains: Allocation Round 7 offshore wind results

What were the AR7 results?

• The AR7 auction opened in 2025 and the results of the offshore wind competition were announced in January 2026. AR7 is an important milestone in the journey towards building a clean power system.
• AR7’s offshore wind auction was both the most competitive and most successful in the UK’s history. Its enormous success demonstrates confidence in, and ambition from, the sector and shows the UK is bucking the trend of a difficult few years for the wind industry – after similar auction rounds fell short or even failed in other countries.
• A record 8.4GW of offshore wind capacity was secured in AR7. The previous six allocation rounds together effectively procured 16.5GW of capacity, so this auction will represent a significant proportion of all CfD-supported offshore wind projects and is on-track with the Government’s pathway to reach clean power by 2030.^[1]

Why are the results of AR7 important?

• The offshore wind projects which secured CfDs in AR7 will deliver critical national infrastructure that will strengthen the UK’s energy security and deliver lower bills, good jobs and economic growth across the country.
• This record 8.4GW capacity is the equivalent of powering up to 12 million homes and unlocks £22 billion in private investment, while supporting 7,000 good, skilled jobs across the whole of the UK, including in Scotland and Wales. Energy UK’s recent Energy in Action case study collection showcases how CfD-linked investment supports jobs and some of the jobs and community benefits.^[2]
• Separate studies by Aurora Energy Research and Baringa Consulting both found that a strike price of around £94 per megawatt hour (MWh) would be cost-neutral for consumers, meaning it would have no impact on bills, and a strike price below this should lead to lower energy bills. The strike price in AR7 for offshore wind is £90.91.^[3],[4]
• While this is higher than previous rounds, it is worth putting into context. The average wholesale price for the UK for 2025 was upwards of £80/MWh, and the cost for new build gas stations to operate is estimated to be around £147/MWh.^[5]

What exactly are Contracts for Difference?

• The Contracts for Difference (CfD) scheme is the main way the UK secures its own sources of clean electricity. It was first introduced in 2014 as a way to make investment in clean energy less risky to attract private sector funding, and to help bring down the cost of renewable energy projects, like offshore wind.
• A CfD is a contract between a low-carbon electricity generator, such as a wind or solar farm owner, and an arms-length body, called the Low Carbon Contracts Company (LCCC).
• Developers of new clean energy projects bid in a competitive auction to receive a contract that guarantees a price for the electricity they generate, offering stable and predictable revenue streams.

How does a CfD auction work?

• The scheme works through an auction process, where developers compete with one another by bidding for a CfD. This auction process is called an allocation round.
• During an allocation round, developers looking to build renewable energy projects submit competitive and closed bids indicating the ‘strike price’ they need for their project. Different technologies compete in different ‘Pots’ or auctions. 
• Competition helps to ensure that renewables projects are procured at the best value possible.

What is a ‘strike price’ and what is the wholesale price?

• During each competitive auction, developers bid to build their project for a guaranteed price of electricity for the length of the contract. This guaranteed price is called the ‘strike price’.
• This is different from the wholesale price, which is the price of buying electricity on the open market, often set by the price of gas. The wholesale price could be more than the strike price but can be lower.
• The wholesale price fluctuates every day depending on several factors, including geopolitical risk, supply, and demand.
• The strike price also represents the cost of procuring new generation capacity, so it can’t be compared directly with the current wholesale price of electricity.
• With a number of ageing power stations due to retire in the coming years, we need to invest in new sources of electricity generation. The cost of building and operating a new offshore wind farm is 41% cheaper than building and operating a new gas plant.^[6]

What’s the difference with prices in AR7?

• Previous allocation rounds used prices set in 2012 levels. This was to provide consistency across multiple rounds – but in reality it meant a lack of clarity around prices in today’s money. This has been updated for AR7, which uses 2024 prices.

What are the benefits of CfDs and the strike price?

• Knowing in advance the price at which developers will be able to sell their electricity for up to 20 years provides them with confidence of their income. This makes projects a less risky investment and helps to lower financing costs, ultimately leading to lower overall costs to the project and therefore households and businesses. As renewables projects have high upfront costs but relatively low operating costs, financing costs have a significant impact on the overall cost of the project.
• Including the offshore wind capacity procured in AR7, the CfD scheme has contracted more than 47GW of renewable electricity across all technology types. As of November 2025, the scheme has 10GW of projects in operation – enough to power up to 15 million homes, half the total number of UK houses.^[7] Since the scheme was launched a decade ago, it has enabled investment of approximately £85 billion into the UK economy, adding around 0.25% to GDP each year, according to Energy UK analysis.
• CfDs have been one of the main reasons behind the UK’s world-leading renewables sector, which has been copied around the world. Average wholesale electricity prices would be 46% higher without wind farms.^[8]

What happens during the contract?

• For the duration of the contract, when the actual price for electricity falls below the strike price, the LCCC will pay the generator the difference between the market price and strike price. If the market price goes above the strike price, the generator will pay the extra money back, as shown by Figure 1; a figurative example of what might happen.

Figure 1: Figurative example of how the CfD mechanism would have performed over the past two years with the offshore wind strike price of AR6 contracts^[9]

• This means that the eventual cost to billpayers will depend on the market price. At the moment, CfDs add around £33 to an average annual bill.^[10] The price of gas often sets the wholesale price of electricity. During periods of high gas prices in 2021 and 2022, CfDs provided net savings on our bills.
• Changes to our energy bills are to be expected as we reduce the proportion of fossil fuels in our electricity mix. Some parts of the bill – such as the cost of CfDs – will go up, but others – such as the cost of electricity – will lower as more renewables come onto the system. The growing number of wind farms across the UK meant the average price of electricity was a third lower in 2025 than it would have been without renewables, according to recent analysis by ECIU.^[11]

What happens next?

• Unlike previous auctions, results for different technologies are being announced separately with offshore wind being announced first. This is so developers can progress critical offshore projects as soon as possible, rather than be delayed by the auctions for other technologies which can take longer.
• The results for non-offshore wind (solar and onshore wind) will be released in early February 2026.
• The next auction round, AR8, will begin later in 2026. It’s important to maintain momentum and ambition in the offshore wind sector. AR7 faced significant delays, which created challenges and brought additional costs for developers and the wider supply chain. The focus for the next allocation round should be on returning to a timely auction schedule. A steady cadence helps to maintain confidence in the sector and its supply chain, which supports thousands of jobs across the UK.

For more information on this paper, please email press@energy-uk.org.uk.

[1] Energy UK (2025) Energy UK Explains: AR7 and Contracts for Difference – October 2025

[2] Energy UK (2026) Energy UK Explains: How Contracts for Difference deliver investment, skills and community benefits

[3] Aurora Energy Research (2025) Offshore wind target deliverable at no extra cost to consumers if AR7 budget is expanded

[4] Baringa Consulting (2025) Securing the benefits of offshore wind for the UK

[5] DESNZ (2026), Record breaking auction for offshore wind secured to take back control of Britain’s energy

[6] DESNZ (2026), Record breaking auction for offshore wind secured to take back control of Britain’s energy

[7] Low Carbon Contracts Company (Nov 2025) LCCC celebrates 10GW of low carbon electricity powering British homes

[8] ECIU (2025) Wind farms cut power prices by almost a third in 2025

[9] Ofgem (2025), Wholesale market indicators; DESNZ (2024), Contracts for Difference (CfD) Allocation Round 6: results; Bank of England (2025), Inflation Calculator; Energy UK analysis

[10] Ben James (2026) GB electricity bills

[11] ECIU (2025) Wind farms cut power prices by almost a third in 2025