What’s happened?
The application window for Allocation Round 8 (AR8) of the Contracts for Difference (CfD) scheme opened on 20 July 2026. The scheme offers the UK one of the largest opportunities to lock in the renewable energy to close the gap to their 2030 decarbonisation targets.
A Contract for Difference is a price guarantee. The government agrees a fixed “strike” price for each unit of electricity a renewable project produces. If the market price falls below that level, the project gets revenue topped up. If it rises above, the generator pays the difference back. This offers renewable projects certainty to mitigate against price volatility risks.
The government awards contracts through competitive auctions called allocation rounds. Seven have run so far. AR8 will run through the second half of 2026. Given the long lead times for large renewable projects, some of the capacity allocated now will contribute to the UK’s 2030 targets, tying AR8 to the government’s Clean Power 2030 goal. Therefore, AR8 plays an important role for the UK government to re-demonstrate their commitment to their decarbonisation goals.
The UK’s CfD scheme has also contributed significantly to the UK’s leadership in the offshore wind sector, second only to China. This has resulted in lowering energy bills across the UK and providing energy security when the market volatility has escalated. UCL found that renewables have saved the UK over £100bn since 2010. The CfD scheme has contracted roughly 39GW, 10GW of which is already operational. This is a ~15% share of the total operational renewable energy capacity in the UK, demonstrating the value of the upcoming auction round.
AR7 set the bar
The last round, AR7, was a record. It’s a strong precedent, and the mood in the market has stayed positive since. The question now is whether AR8 can match it. There’s reason for caution. Slightly less capacity is eligible to bid this time than last. But the appetite is still there, and CfDs remain central to how projects get sold and funded.
Prices have been held
Before each auction the government publishes the maximum it’s willing to pay per unit of electricity. These ceilings are a starting point. In every round so far, the prices agreed have come in well below the maximum.
For AR8, those ceilings have held at the same level as AR7 to maintain market certainty for developers while also ensuring projects compete on prices to drive up competition.
Technology | AR7 Outcome | AR8 max strike price (ASP) |
Fixed-bottom offshore wind (Pot 3) | £90.91/MWh avg (max £113) | £113/MWh, ceiling frozen at AR7 level |
Floating offshore wind (Pot 4) | £216.46/MWh | £271/MWh (competing with new ODOW category) |
Looking ahead
We are optimistic of the potential value to developers across renewable technologies included in this round but highlight that the success of this will depend on the strike price and whether this will be high enough for projects.
The strike price has been held. This provides consistency but it also means that there is a risk that projects are facing higher costs under the same prices. The fifth CfD round failed to get any offshore wind projects owing to the strike price being too low. The ongoing inflationary risks to the world from continued instability in the Middle East raise the potential pressures on projects looking to secure tenders in the upcoming round. This will mean the government will need to ensure inflation doesn’t erode the value of strike prices to ensure success of the tender.
We also await the budget, which is due to be announced between September and November of this year. This is the money the government sets aside to cover its side of the CfD contracts. It works as a cap on the top-up payments the government would owe if wholesale prices fell below the agreed strike prices, rather than cash it plans to spend. Given there is a new Labour leader since July 2026, with Miatta Fahnbulleh named security of state for energy security and net zero, there is uncertainty over the new government’s priorities. We will continue to follow for updates on how this round will unfold.
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