In a recent white paper, Senior Consultant Alon Carmel and Analyst Clemens Koenig review the outcome of the latest UK auction for “less established” low-carbon generation technologies, such as offshore wind. The auction resulted in record low costs, with prices paid for offshore wind in the mid-2020s now not much higher than the government’s expected wholesale price. The authors dissect the auction results and analyse the bidding strategies used to successfully secure maximum benefit.

The results are in line with other auctions in Europe, where the costs of renewable power have fallen sharply, owing to cost efficiencies. Such lower prices raise the prospect of a future in which solar, onshore wind, and offshore wind compete directly against each other and against other forms of power generation, without relying on government subsidies. These developments will bring with them increasing costs of integration and increased risk for both governments and investors—for example, the risk that projects will not be delivered, as well as the risks associated with greater exposure to market prices.