The United Kingdom’s upcoming Contracts for Difference (CfD) Allocation Round 7 (AR7) could bring renewed stability and value to the offshore wind industry despite a smaller overall budget, according to new analysis from energy consultancy Wood Mackenzie.
The research firm said on Thursday that the £900 million annual budget for AR7 — a 41% reduction from the previous round — could still support around 5.5 gigawatts (GW) of new capacity. The auction’s new structure, which includes 20-year contracts and tighter competition, is designed to extract greater efficiency and attract bids that balance affordability with long-term growth.
“AR7 extends CfDs to 20 years and sharpens competition so a smaller pot can buy more MW per pound,” said research analyst Sasha Bond-Smith. “It is a deliberate reset designed to change the narrative from volatility to stability.”
Principal analyst Finlay Clark added that a new conditional top-up mechanism will allow the government to allocate funds more flexibly, ensuring the full budget is used effectively. “The mechanism helps ensure full pot utilisation and avoids a repeat of AR6’s effective £895 million underspend,” Clark said.
Wood Mackenzie described AR7 as a “more-for-less recalibration,” arguing that the structure gives the Department for Energy Security and Net Zero (DESNZ) greater scope to balance affordability, capacity, and supply chain resilience.
The consultancy said the reforms mark a shift from recent setbacks in the offshore wind sector, positioning the UK to sustain its long-term renewable energy targets.
