Renewables: Doubling down on development

The blog below is an extract from Slaughter and May’s UK Energy and Infrastructure: What’s to come in 2025 publication. For information regarding other sector developments, please click here. 

Renewable energy development is set to accelerate further in 2025 as the government takes steps towards its ambitious decarbonisation targets and begins to implement the Clean Power 2030 Action Plan (CP30). 

In relation to offshore wind, CP30 estimates that the UK needs 43-50GW by 2030, a reduction as compared to Labour’s pre-election plans, but an ambitious target given that current installed capacity is 14.8GW. This new capacity will continue to be supported under the Contract for Difference (CfD) mechanism. Allocation Round (AR) 6 in September 2024 awarded CfDs totalling 3.36GW of capacity to two new offshore wind projects, 1.58GW to projects which had rebid capacity from AR4 and 400MW to one floating offshore wind project, a significant improvement on AR5. CP30 states the aim to deliver 2030 capacity by securing at least 12GW across the next two to three allocation rounds – A R 7, A R 8 and, depending on the speed at which projects deploy, A R 9. Plans for reform of the CfD are likely to crystallise during 2025 with measures such as changes to eligibility, auction parameters and the length of the term under review. Looking further ahead, additional reforms to the CfD may emerge following the outcome of the Review of Electricity Market Arrangements programme but will not be implemented until AR9 at the earliest. 

In relation to floating offshore wind projects, the financing of the Green Volt project will be an important milestone for the sub-sector. We are also expecting the outcome of the Crown Estate Offshore Wind Leasing Round 5 (also known as the Celtic Sea leasing round) in 2025, which targets 4.5GW of floating offshore wind capacity. 

To capture wider value from offshore wind, 2025’s AR7 will see the Clean Industry Bonus scheme implemented for the first time, aiming to incentivise investment in ports and key components. To enter CfD AR7, all projects will need to achieve a minimum standard of at least £100 million per GW for a fixed bottom offshore wind farm and £50 million per GW for floating offshore wind (indexed). Generators may compete for additional payments where they make extra commitments, but failure by a generator to meet its commitments will result in deductions from its CfD revenues. 

Onshore wind is likely to make a comeback in 2025; CP30 estimates a further 12.8-14.8GW is required. Developments will be assisted by the lifting of the de facto ban on new installations in England, re-admission of projects above 100MW to the Nationally Significant Infrastructure Projects regime and establishment of the Onshore Wind Industry Taskforce. As early renewables projects near the end of their period of support, CP30 also includes a commitment to minimise any capacity that may be lost before 2030, including through supporting repowering of onshore wind through the CfD scheme from AR7. Solar’s prospects in 2025 also appear promising following the government’s grant of Development Consent Orders for three projects soon after the general election in 2024. Finally, the government intends to respond to the consultation on transitional support arrangements for large-scale biomass shortly. 

Funding from the National Wealth Fund (NWF) and Great British Energy (GBE) are likely to be deployed to support the CP30’s clean energy ambitions. In the renewables sector, NWF could play an important role in the deployment of floating offshore wind, where the commercial lending market is more nascent, as well as crowding-in investment into associated port infrastructure and the manufacturing supply chain. GBE is also expected to commence its investment and development role in 2025, initially supported via the NWF. CP30 confirms that GBE will (co)lead projects through the pre-development and potentially the construction and operation phases, with further detail as to its precise role likely to emerge once the Great British Energy Bill passes. 

However, planning and grid bottlenecks are still to be tackled in 2025. CP30 aims to address these by boosting local planning capacity and flexibility to prioritise critical energy infrastructure, supporting grid and battery storage enhancement.  

For information regarding other sector developments, please click here.