What the AR7 Reforms mean for Offshore Wind Developers? 

The recent announcement of Allocation Round 7 (AR7) reforms mark a suite of new measures and potentially an alternative pathway to securing a Contract for Difference (CfD). Framed around the principles of fair competition and value for money for consumers, OWC specialists offer their initial reflections on the impact and intent behind these changes. 

1. Entry into CfD Auctions Without a Consent Award 

Phased CfDs are now formally available for floating offshore wind projects. The Government has also committed to reviewing the applicability of this approach for fixed-bottom technology in future rounds.  

As a non-sequential phased CfD, which allows revenue support across multiple phases without requiring each phase to be built in immediate succession, this reform should assist in the supply chain build out which can mirror the phased demands from projects. 

Kirsty Watt, Senior Consultant in the Bid Advisory team notes,

“This move reflects growing recognition of the unique development profiles and risk structures of floating wind projects, particularly their longer lead times and greater uncertainty. The phased approach could provide much-needed flexibility, allowing projects to lock in support earlier while continuing development.”

2. Entry into CfD Auctions Without a Consent Award 

Fixed-bottom offshore wind projects will now be permitted to enter the CfD auction process without having secured full consent. This change has generated mixed reactions across the sector. 

Supporters argue this reform will: 

• Foster greater competition,  
• Accelerate supply chain engagement  
• Reduce deployment timelines

However, consent delays are not the only bottleneck within project development. Grid connection issues and supply chain capacity remain critical challenges and will remain irrespective of the consent status of a project. 

There is also concern that earlier-stage projects may factor a higher risk premium into their strike prices, potentially raising overall costs to consumers. To manage this, a minimum development threshold has been established, ensuring that only projects demonstrating sufficient progress can compete in AR7 without full consent. 

3. CfD Contract Term Extension: From 15 years to 20 years

In response to rising market volatility, the Government has extended the CfD contract length for offshore wind from 15 to 20 years. This is widely seen as a de-risking mechanism, expected to reduce the cost of capital through improved revenue certainty and better alignment with asset lifespans. 

A longer contract period also increases the potential for lower strike prices in the auction, as developers can spread costs over a longer timeframe and reduce merchant tail risk. For floating wind in particular, this change could unlock scalability and allow shared use of existing fixed-bottom supply chains.  

The true impacts of this change will develop over time. The financial benefits should be felt initially, with lower WACC and improved bidding behaviour, whilst the full impact of reduced electricity prices for consumers will be realised in the longer term. 

4. Clean Industry Bonus (CIB) Payments Decoupled from CfD Suspension

The government has introduced non-price factors into AR7 including the CIB, with awards conditional on demonstrated UK supply chain commitments. Adding a new dimension to AR7, it addresses the governments prioritisation of local job creation, infrastructure investment, and energy cluster development. Importantly, the Government has clarified that the CIB payments will continue even if CfD payments are suspended, reflecting that the CfD suspensions may be unrelated to a project’s supply chain commitments. This distinction acknowledges that the reasons for CfD suspension do not necessarily align with the CIB.  

It should be noted that CIB is only available if selected by the Government, and applies to qualifying projects, mostly aimed at offshore wind with demonstrable UK supply chain content. The CIB for AR7 has now closed, successful projects have been notified, enabling projects to further refine costs ahead of their respective CfD application.   

5. Restrictions on Re-bidding Surrendered Capacity 

A temporary restriction has been imposed preventing projects that voluntarily surrendered CfD capacity in AR1–AR6 from rebidding into AR7. This aims to preserve the integrity of the scheme by discouraging speculative bidding and ensuring budget allocations are used efficiently. It also encourages participants to price risk more accurately at the point of initial submission. 

However, this reduced flexibility may disproportionately affect emerging technologies like floating offshore wind, which are more vulnerable to economic shocks. The long-term policy on this issue will be reviewed post-AR7 and implemented in AR8. 

6. Process Reforms and Transparency Enhancements 

For fixed-bottom offshore wind, procedural reforms have also been introduced. As before, Contract Budget Notices will be published ahead of the sealed bid window giving developers a view into the Government’s overarching ambitions. 

John MacAskill, Group Growth Director at ABL Group notes, “While the intent is to enable more strategic oversight as well as balancing value to the consumer with the Clean Power 2030 targets, this proposal has the potential to raise concerns among developers about confidentiality and the potential for perceived political influence; particularly if used to adjust auction outcomes mid-process”. Its impact will likely depend on how transparently and consistently the new powers are applied. This proposed change to the Statuary Instrument is also subject to parliamentary review. 

John MacAskill, Group Growth Director at ABL Group notes,

“While the intent is to enable more strategic oversight as well as balancing value to the consumer with the Clean Power 2030 targets, this proposal has the potential to raise concerns among developers about confidentiality and the potential for perceived political influence; particularly if used to adjust auction outcomes mid-process”. Its impact will likely depend on how transparently and consistently the new powers are applied. This proposed change to the Statuary Instrument is also subject to parliamentary review.” 

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Conclusion 

AR7 marks a pivotal moment in the evolution of the CfD framework.

Amy Dowdeswell, Country Manager UK, at OWC states,

“It is vital to the UK offshore wind market and the broader Clean Power 2030 targets, that AR7 is a success. These reforms reflect a more flexible, risk-aware and innovation-focused approach. Providing more attractive commercial terms, restoring investor confidence, and getting stalled gigawatts back on track”. The changes aim to support emerging technologies and attract investment in a challenging economic environment.” 

While the direction of travel is encouraging, the effectiveness of these reforms will depend on strong implementation, a responsive market, and the Government’s ability to address ongoing structural barriers, such as grid connectivity and supply chain constraints. 

The AR7 bid window is scheduled to occur between 7^th– 27^th August, OWC understand further AR7 capacity ambition and budget notice will be confirmed next week. Ahead of this clear strategic oversight will be essential to ensure that the reforms deliver on their core objectives: accelerating deployment, reducing costs and creating long-term value for consumers. 

What is evident is that AR7 signals a shift in policy intent. The Government is seeking to reshape the CfD framework to better align with the demands of a more dynamic and ambitious energy transition. Whether this shift delivers the intended impact will only become clear over time. 

At OWC, we don’t just understand the AR7 reforms, we help shape how the industry responds. Our specialist cost modelling team brings profound expertise from successful CfD bids, delivering strategic insights and post-action value. We partner with our clients to optimise costs, unlock engineering solutions and maximise returns across the project lifecycle. 

Whether you’re exploring AR7, future auctions, or simply want to unpack the reforms, connect with Amy Dowdeswell or Juan Frias. 

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