CfD Subsidy Rates Climb in April 2025

Overall CfD subsidies for April 2025 were much lower than last year, what is going on?

Introduction

The total Contract for Difference (CfD) subsidies for April 2025 (£155m) have been declared by the Low Carbon Contract Company (LCCC). Although slightly up on March 2025 (£152m), total subsidies are much lower than April 2024 (£270m - see Figure 1). This week’s bonus article investigates what is going on.

Figure 1 - Total CfD Subsidies by Month and Technology (£)

The biggest fall in subsidies compared to last year came from offshore wind, where subsides are down from £211m in April 2024 to £105m in April 2025.

Generation

The biggest driver of lower subsidies is lower generation. Production of electricity from offshore wind in April 2025 at 1,263GWh was much lower than last year’s 2,237GWh and lower even than April 2023 when 1,287GWh were produced (See Figure 2).

Figure 2 - Intermittent Renewable Generation for the Month of April (GWh)

This ought to be worrying for the offshore wind industry because since April 2023 three new offshore windfarms have come online. Hornsea Project Two and Moray East activated their CfDs in March 2024 and Neart Na Gaoithe (NNG) came online part way through April 2025. More generators coupled with reduced output is not a good sign for offshore wind economics.

Onshore wind generation in April fell too compared to last year. Solar generation increased substantially from 2.7GWh in April 2024 to 16.9GWh in April this year. This can be explained by the recent activation of the CfDs for five new solar farms since April 2024. However, CfD solar generation remains a trivial amount of overall output.

CfD Strike Prices

The fall in generation overwhelmed the uptick in average strike price for offshore wind generators (see Figure 3).

Figure 3 - Evolution of CfD Strike Price by Technology (£ per MWh)

Offshore wind strike prices were £149/MWh in March 2025 and ticked up to £158/MWh in April. This was driven by the annual indexation in line with inflation and the addition of NNG with a current above average strike price of ~£163/MWh. Strike prices for onshore wind, Biomass and Biomass with CHP were all indexed upwards in April. The average strike price for solar power fell in January as some new solar farms came online and indexed upwards in April.

CfD Subsidy Rates

The subsidy for CfD generators is calculated as the difference between the strike price and the reference price. The reference price is a measure the market price of the electricity generated. Reference prices have been falling since the peak around £102/MWh in January and February to just over £75/MWh in April 2025.

The increase in strike prices and the fall in reference prices has led to a big uptick in the subsidy paid per MWh of electricity generated (see Figure 4).

Figure 4 - CfD Subsidy per MWh (£ per MWh)

Subsidies for offshore wind have risen from £46/MWh in January 2025 to £83/MWh in April. Onshore wind subsidies have gone up from £10/MWh to £44/MWh in the same period. On average, solar farms paid back £50/MWh in January, but they generated very little so the overall absolute repayment was tiny. In April they received £9/MWh in subsidy. Although not shown on the chart, biomass subsidies (burning trees at places like Drax) went up from ~£56/MWh in March to £61/MWh in April 2025.

We can now see the share of market revenue and subsidy revenue for each intermittent technology in April 2025 as shown in Figure 5.

Figure 5 - Market Price and Subsidy by Technology for April 2025 (£ per MWh)

The reference price varies a little for each technology, reflecting the different timing of their output. Solar tends to produce in the middle of the day when demand is low and prices dip.

Offshore wind received subsidies of £83/MWh or over 52% of revenue. Onshore wind received £44/MWh (nearly 38%) and solar got £9/MWh (12%) of their revenue from subsidies. This result comprehensively belies the claim that renewables are cheaper than gas. Reference prices are mostly set by gas and the subsidies are paid in addition to the reference price, so when subsidies are positive, the basic costs of renewables are more expensive than gas-fired electricity, even with a carbon tax.

Outlook for CfD Subsidies 2025/26

The outlook for CfD subsidies is mixed. We can expect the average strike price continue at about the current level. If gas prices and hence market prices remain in the current range, then we can expect the rate of subsidies to be up on last year.

However, the absolute level of subsidies is highly dependent on how hard the wind blows. The power output of renewables highly dependent upon the weather and so is the cost that finds its way on to our bills.

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