UK Opens Wind Power Auction Amid Rising Costs and Political Will to Transition to Carbon-Free Grid

The UK has opened its critical offshore wind power auction with costs expected to rise due to increasing commodities prices, labor costs, and interest rates. The auction aims to secure capacity to make a carbon-free electricity grid by 2030. Winning bids could be at least £85 per megawatt hour, above wholesale power prices in 2024, and contracts extended to 20 years. The auction could attract bidders including SSE Plc, RWE AG, and a partnership between BP Plc and Energie Baden-Wuerttemberg AG.

The UK has opened its latest offshore wind power auction, aiming to secure sufficient capacity to achieve a carbon-free electricity grid by 2030. The auction, which guarantees the price of power for renewables developers, is crucial as it represents one of the final opportunities to line up projects that will be operational by the end of the decade [1].

The UK government has increased the maximum electricity price on offer compared to last year to attract projects. However, this move could make it more challenging to lower consumer bills, which the government has also promised to do. Analysts predict that winning bids could be at least £85 per megawatt hour, up from £82 last year, according to Bernstein [1]. This price is above the 2024 wholesale power prices, which averaged about £74. Contracts for this auction are extended to 20 years, meaning consumers will be paying these prices until around the middle of the century [1].

The auction timeline is still being determined but is expected to take place by February of next year. Potential bidders include SSE Plc, RWE AG, and a partnership between BP Plc and German utility Energie Baden-Wuerttemberg AG, which recently won consent for a project under development in the Irish Sea [1].

The UK employs a contract for difference model, which pays a top-up when wholesale power prices are below the agreed contract price. If market prices rise above the contract price, generators pay back the difference to consumers, as seen during the 2022 energy crisis [1].

Recent years have seen the offshore wind sector face increased costs due to rising commodities prices, labor costs, and higher interest rates. This strain is evident in Europe, with auctions in Germany and Denmark failing to attract bidders, and major projects being canceled due to economic unviability [1]. The UK, however, remains committed to rapidly scaling up offshore wind as a core government policy, despite these challenges.

Meanwhile, BP and JERA have launched JERA Nex bp, a 50:50 joint venture with 13 GW in potential capacity, aiming to develop the global offshore wind energy sector [2]. This collaboration, along with the UK government's push for offshore wind, underscores the sector's importance in achieving decarbonization goals.

The Scottish government has also given SSE Plc consent to build the world’s largest offshore wind farm, the Berwick Bank wind farm, which could provide power to 6 million homes [3]. This project is crucial for the UK’s goal to decarbonize the power grid by 2030 but may also add further costs to consumer bills due to its impact on the nation’s electric grid.

References:
[1] https://www.bloomberg.com/news/articles/2025-08-07/uk-opens-critical-wind-power-auction-with-costs-set-to-rise
[2] https://sustainabilitymag.com/news/jera-nex-bp-what-is-bp-and-jeras-offshore-wind-project
[3] https://www.bloomberg.com/news/articles/2025-07-31/scotland-gives-go-ahead-for-world-s-largest-offshore-wind-farm