Solar Energy UK
9 December 2025
A Government scheme will deliver more cheap, clean energy than ever before over the coming years, while lowering energy bills.
The Department for Energy Security and Net Zero confirmed the £310m budget for Allocation Round 7 (AR7) of Contracts for Difference (CfD) yesterday.[1] With up to £135m earmarked for solar generation, the round could support more than four gigawatts of capacity – around the same amount expected to be delivered this year on the ground and rooftops combined.
The figure refers to potential payments to generators and should not be taken to be direct Government spending.
The CfD system uses competitive bidding to keep down the cost of support for renewable energy, with operators being paid a fixed amount regardless of the prevailing price for wholesale power. When wholesale electricity prices are below the agreed ‘strike price’, operators receive top-up payments from consumers. When wholesale prices exceed the strike price, operators pay the difference back, reducing the ‘policy costs’ applied to bills.
The key function of CfDs is to reduce risk, both of volatile prices hitting consumers and diminishing investor confidence. This lowers the cost of capital and offers potentially lower bills.
The administrative strike price (ASP) – a cap on bids – for solar energy has been set at £75 per megawatt-hour, expressed in 2024 money. This compares to the average wholesale cost of energy (the ‘Intermittent Market Reference Price’) over the year so far of £81/MWh. The figures compare to an ASP of £92/MWh for onshore wind and £94/MWh for landfill gas. At the upper end, successfully deploying wave energy technology would attract £386/MWh.
The final solar strike prices may be even lower when the winning bids are revealed early next year. For solar farms, the cap on bids for the sixth round was knocked down at auction by 22%. Moreover, the contracts will run for 20 years from when projects become operational, likely from 2027-2030 onwards. This is five years longer than previous periods, which should push strike prices down further.
But there are other routes to market. The prevailing reduction in wholesale prices may encourage operators to reach power purchase agreements with corporate or public sector clients, or supply power directly to the grid as merchant plants.
“The budget for CfD AR7 is most welcome. Solar energy is the cheapest form of power generation and has never been cheaper. We welcome the Government’s continued support for clean, secure and homegrown energy,” said Gemma Grimes, Director of Policy and Delivery at Solar Energy UK.
“Expenditure on the CfD system pales in comparison to the £44bn spent on subsidising bills during the energy price crisis, which was caused by a spike in the price of natural gas. Without renewables, our energy bills would be much more expensive and much more volatile,” he added.
[1] Contracts for Difference (CfD) Allocation Round 7: statutory notices – DESNZ
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