Tidal energy CfD price rises by 29%

In a recent press release, the UK government has announced an increase in the maximum price that projects in the next round (AR6) of its flagship Contracts for Difference (CfD) renewables scheme will receive, “to further cement the UK as a world leader in clean energy”. 

The CfD scheme is designed to encourage investment in renewable energy projects by guaranteeing a price from the government for the electricity they generate. 

In addition to increases for offshore wind, solar, and geothermal projects, the announcement reveals that the maximum bid price for tidal energy has been bumped by 29% - from £202/MWh to £261/MWh3.

This increase has been very positively received by the tidal energy sector.  Renewable UK's Chief Executive Dan McGrail said:

“… we welcome the strong commitment to the sector shown by Government today, which demonstrates that the UK is intent on remaining a global leader in offshore wind, as well as innovative technologies like floating wind and tidal stream”.

Marine Energy Wales also welcomed the price increase for tidal stream:

“We are pleased today to see an increase in administrative strike prices (the maximum value a project can bid in at) for the UK Government’s Contracts for Difference scheme coming into effect for Allocation Round 6 next year …Whilst Allocation Round 5 was deemed a massive success for the tidal stream sector, we are pleased too to see an increase in administrative strike price for this technology. An uplift of 29% from £202/MWh to £261/MWh is a strong signal of continued support from UK Government, providing the nascent industry with additional headroom whilst attempting to industrialise amidst difficult economic circumstances”.

Orbital Marine Power, who won two contracts in AR5 and was recently selected by the European Commission’s Horizon Europe Programme to deliver a multi-turbine tidal energy project, EURO-TIDES, gave a similarly positive response:

“Really good news to see logic prevail in today’s announcement from the UK Government in raising maximum strike prices under Contract for Difference from next year, including for tidal stream. This is the type of understanding and commitment needed to build confidence in a new industry”.

Magallanes Renovables, also a winner of two contracts in AR5, said:

"Good news for the industry! The UK government has increased the maximum price for tidal energy projects by 29% in its flagship renewables support scheme. This type of news confirms not only the commitment of the Uk to tidal energy but also the huge potential of the industry".

Tidal power first won contracts in AR4 of the CfD scheme in July 2022, when Orbital Marine was awarded two contracts for deployments at EMEC’s Fall of Warness site; Simec Atlantis secured a contract to develop the MeyGen site in Caithness; and Magallanes were awarded a contract for a tidal energy project at Morlais in Wales.

The administrative strike price in AR6 of the CfD scheme is in part informed by a May 2023 report providing a “Review of technical assumptions and generation costs: levelised cost of electricity from tidal stream energy”, produced by Frazer-Nash Consultancy on behalf of the Department for Energy Security & Net Zero. The report begins by arguing that "As a renewable but predictable resource, in which the UK is rich, Tidal Stream Energy (TSE) could provide an important contribution to the UK’s net zero goal". 

Also explored are current trends in tidal stream development which the report believes will contribute to cost reduction over the next 25 years. These are: larger turbines, both in terms of rotor diameter and rated power; larger arrays, and array layout optimisation to minimise blocking effects; a move away from gravity-based foundations to monopiles for fixed devices; and the installation of multiple rotors on a single supporting structure, whether fixed or floating.

The increase in strike price for tidal stream is indeed good news, and we are optimistic that research and innovation in this field will help tidal stream become a key piece of the UK's renewable energy mix.