Analysis – new offshore wind farms could significantly cut power prices
Renewables secured at today’s auction could have reduced gas generation by a third last year, further weakening link between gas and wholesale power prices.
By Jess Ralston
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The 8.4GW of offshore wind power announced this week in the Contracts for Difference (CfDs) auction Allocation Round 7 (AR7) [1] is set to boost clean power output, such that – had these wind farms been operating over the last year – gas power generation could have been a third (35%) lower, cutting day-ahead wholesale electricity prices by up to £11 per MWh (13%), down to £72/MWh, according to analysis by the Energy and Climate Intelligence Unit (ECIU). [2]
The price reductions caused by these new renewables would have been on top of the savings delivered by operational wind farms pushing gas off the system, which cut the average price by around £38/MWh in 2025, down from £121/MWh to £83/MWh. [3]
Taken together, these results suggest that, had Britain deployed no wind power over recent decades and had instead relied more on gas, power prices could have been up to £49/MWh (67% i.e. two-thirds) higher in 2025 compared to if renewables had been rolled out faster. [4]
Jess Ralston, Energy Analyst at the Energy and Climate Intelligence Unit, said:
“It might not be itemised on bills, but more British renewables squeezing gas off the system has the effect of reducing wholesale power prices, lowering those costs for both industry and households.
"There’s lots of large numbers being bandied around, but the reality is that the offshore wind projects secured today are likely to see levies on bills break-even. And in the event of another gas price spike, which given uncertainty in petro-states worldwide is possible, could see billpayers paid back.”
As well as cutting wholesale prices by displacing gas power generation, analysis suggests that the new offshore wind projects are likely to break even in their CfDs, such that these contracts could add nothing to customers’ bills. [5]
These new projects’ contribution to cutting wholesale prices will depend on the generation mix and market arrangements when they come online from 2028 onwards. In the meantime, around 8GW of other wind projects are currently under construction and will come online over the next few years, helping to cut prices. [6]
The cut in day-ahead prices of almost a third seen in 2025 – after a cut of a quarter in 2024 – is part of a longer-term trend of rising wholesale savings as Britain’s growing fleet of wind farms pushes more gas power generation off the system. These ‘hidden savings’ in wholesale costs help to offset some of the costs of supporting renewables and expanding and operating the grid, and the growth in savings is expected to lead to annual net savings in future. [7]
Notes to editors:
1. Contracts for Difference Allocation Round 7 results (DESNZ, Jan 2025) – Results list 8,245MW offshore wind and 192.5MW floating offshore wind, totalling 8,437.5MW, rounded to 8.4GW.
2. The analysis followed largely to same approach to the report Marginal Gains (ECIU, Oct 2025), using data for transmission-connected generation, storage and interconnection (i.e. excluding smaller projects). The only difference was the final step: whereas the report considered the effects of having less transmission-connected wind generation (i.e. fewer large wind farms), the new analysis considered the opposite, i.e. more wind generation. For the new analysis, load factors in AR7 Allocation Framework(DENSZ, 2025) were used to estimate the annual generation from the new offshore wind projects. Constraints were estimated using thermal constraints data for 2025 (NESO, 2026), firstly adding these constraints to the wind transmission output for 2025 to give a total, and then expressing the constraints as a percentage of that total. It was assumed that this value would apply to new projects i.e. that grid developments would have matched the provision made for existing projects. The extra output minus associated constraints was expressed as a percentage of the actual wind generation in 2025. For each half-hour, this extra percentage was applied to wind output, and an equivalent amount of generation was deducted from gas output (with a gas output floor of zero). This process created a modified distribution curve for gas output (i.e. number of half-hours vs gas output level in GW), which was applied to the day-ahead gas marginal pricing curve for the year, to give an overall average day-ahead price for the year. In the earlier report (ECIU, Oct 2025), the average annual price was stated as a range bounded by two values (HH-weighted and GWh-weighted, with the actual value being somewhere in between), and this new analysis simply uses the mid-point between the two.
3. Wind farms cut power prices by almost a third in 2025 (ECIU, Jan 2026)
4 The 8.4GW of projects secured in AR7 is over half as much offshore wind capacity as was in place in 2025. The Renewable Energy Planning Database (DENSZ, Oct 2025) stated 14.7GW of operational offshore wind in October 2025 – this is published quarterly and so can have a lag in data. The UK wind energy database (RUK, accessed Jan 2026) currently states 16.1GW of operational offshore wind capacity.
5. The report Achieving offshore wind goals with no burden on billpayers (Aurora Energy Research, Dec 2025) estimates that (fixed) offshore wind CfDs would break-even at £94/MWh (2024 prices). Offshore wind in AR7 cleared at £91/MWh (2024 prices). Accounting for floating offshore wind in AR7 (which has a higher strike price, but much smaller capacity) gives a weighted average price of just under £94/MWh for the 8.4GW of fixed and floating offshore wind in AR7.
6. The Renewable Energy Planning Database (DENSZ, Oct 2025)
7. FES 2025 Economics Annex (NESO, Dec 2025)
For more information or for interview requests:
George Smeeton, Head of Communications, ECIU, Tel: 07517 407687, email: george.smeeton@eciu.net