No offshore wind projects secured contracts in Auction Round 5 (AR5) of the Contracts for Difference (CfD) scheme, the Climate Change Committee (CCC) has confirmed in its assessment of recent net zero developments, published on 12 October 20231. The failure is attributed to the Administrative Strike Price not being adjusted to reflect substantial increases in supply chain costs beyond the level of general inflation1.
The CCC said it had flagged the risk before the auction outcome was known. In its June 2023 progress report, it noted the same concern about strike prices and cost inflation1. The committee stated that in forthcoming auction rounds it is imperative that policy is adjusted to deliver contract awards and the commissioning of offshore wind farms as soon as possible, citing the essential contribution of offshore wind to net zero and the very high costs of gas-fired generation used in the meantime1.
"The lack of any awarded contracts for offshore wind in AR5 was due to a failure to adjust the Administrative Strike Price to reflect substantial increases in supply chain costs beyond the level of general inflation."
The CCC's wider assessment found that the UK remains unlikely to meet its Nationally Determined Contribution to reduce emissions by 68% between 1990 and 20301. It said there is a 4% shortfall between the quantified plans in the Government's Carbon Budget Delivery Plan and the 2030 NDC1. The proportion of required emissions reductions in 2030 covered by credible plans rose from 25% to 28%, which the CCC attributed to confirmation of the Zero Emission Vehicle mandate, offset in part by potential damage to consumer and investor confidence following the Prime Minister's 20 September announcements1.
The committee also reported that the grant for heat pumps was increased from £5,000 to £7,500 but was not accompanied by a larger budget, so it will serve fewer homes1. It said the exemption of 20% of households from the 2035 gas boiler phase-out will affect emissions out to 2050, making net zero considerably harder to achieve1. Scrapping the requirement for private rented homes to reach EPC C by 2028 would have saved tenants of upgraded properties £255 per year under pre-crisis energy prices, or around £325 at the current price cap, according to Government estimates cited by the CCC1.
| Development | CCC assessment |
|---|---|
| AR5 offshore wind contracts | None awarded; strike price not adjusted for supply chain costs1 |
| Heat pump grant | Raised from £5,000 to £7,500, no larger budget, fewer homes served1 |
| Gas boiler phase-out | Delayed to 2035, with 20% of homes exempt1 |
| Private rented EPC C by 2028 | Scrapped; would have saved tenants £255 per year at pre-crisis prices1 |
| ZEV mandate | Implemented in legislation; 80% of new cars sold by 2030 to be zero-emission1 |
Why it matters for households
Offshore wind is a large part of the plan to move UK electricity generation away from gas, and the CCC notes that gas-fired generation is very costly while wind capacity is not built1. A shortfall in new offshore wind commissioning therefore has a bearing on how much gas the system continues to rely on, and on the wholesale prices that feed through to household bills. The CCC also states that the cancellation of some net zero measures is likely to increase both energy bills and motoring costs for households1.
On home heating, the CCC says the changes to buildings policy create widespread uncertainty for consumers and supply chains1. The 20% exemption from the 2035 gas boiler phase-out leaves open which households are covered, which the committee says may create a lack of clarity for a wider share of the buildings sector1. For renters, the dropped EPC C requirement means the energy savings estimated at £255 per year under normal prices, or around £325 at the current price cap, are not delivered through that route1. The CCC adds that lower bills under the policy may have been partially offset by rent increases1.
What happens next
The CCC plans to publish its advice on the Seventh Carbon Budget in early 20251. It has said it will engage widely on that advice and continues to offer resources to support an evidence-led debate in Parliament1. The committee also urged the Government to restate strong British leadership on climate change before COP28 in Dubai1. No date has been reported for the next Contracts for Difference auction round or for any adjustment to the Administrative Strike Price1.