Offshore Wind Farms Being Overcompensated

Many offshore wind farms have received more in subsidies than the initial build cost, surely that is more than enough.

Introduction

Subsidies for renewables have been in the news in the past few months. In January, the Government changed the inflation measure that Renewables Obligation Certificates (ROCs) and Feed-in-Tariffs (FiTs) are indexed by from RPI to CPI. This had the effect of lowering the expected revenue paid to generators subsidised by these schemes. The justification for this change in the consultation was that the government considered that generators had been “overcompensated” by indexing to RPI.

In April, the Government also announced that the Carbon Price Support (CPS) scheme will be removed in April 2028. The CPS sets a tax on carbon that increases the wholesale price of electricity generated from gas and coal. However, because ROC-funded generators receive the wholesale price of electricity in addition to their certificates, the CPS also acts as a hidden subsidy to these generators. Abolishing the CPS will negatively impact the economics of these generators.

The combination of these moves unsettled the renewables industry and later in April Ed Miliband announced “decisive action to break the influence of gas on electricity prices.” The detail of the announcement does not quite live up to the headline. At its core, ROC-funded generators will be offered voluntary long-term contracts called Wholesale Contracts for Difference (WCfD) which will offer a fixed price for the electricity they generate. In effect, ROC-funded generators would be offered a fixed price for the whole of their output, a fixed WCfD plus their ROCs. As these contracts are voluntary, there is no incentive for generators to take up these contracts unless they believe they will receive more money under the fixed price contract, rather than from the market. However, the government is also wielding a stick by saying they will increase the Electricity Generators Levy (EGL), a tax on profits if electricity prices rise above a certain level. However, the fact remains, WCfDs are effectively another subsidy for renewables when the government already believes they have been over-compensated.

There is already a labyrinth of subsidies for renewable energy and compensating subsidies for industry amounting to a total of £585bn. It is time to ask how much subsidy is enough? We can do this by looking at individual offshore wind farms and comparing the subsidies received compared to the original build cost.

ROC-Funded Offshore Wind Farm Subsidies

The starting point is the six ROC-funded offshore windfarms that have received the highest value of certificates according to the Ofgem database. These are, in alphabetical order: Greater Gabbard, Gwynt y Mor, London Array, Race Bank, Sheringham Shoal and West of Duddon Sands (WODS).

The analysis has examined the value of ROC subsidies received over the life of the wind farm to the end of December 2025 and the cost to build the wind farm in the first place. Typically, each company building the wind farm builds the turbines and the transmission lines to connect the windfarm to shore, called the Offshore Transmission Asset (OFTO). Once the windfarm is operational, the OFTO asset is sold to a third party, recouping part of the build cost, and in return the wind farm pays a fee to transmit its electricity to shore. We can compare the subsidies received to the net build cost after the OFTO has been sold. A summary of the results is shown in Figure 1 below:

Figure 1 - ROC-funded Offshore Wind Farms Receiving the Highest Subsidies

All the top six wind farms except Gwynt y Mor have received more in subsidies than the net cost of building the wind farm in the first place. In 2025, Gwynt y Mor received ROCs to the value of £215m, and at that rate, it too will have received more in subsidy than the net build cost by the end of April. We shall now take a closer look at three of the top offenders.

Perhaps the worst offender is the 504MW Greater Gabbard offshore windfarm off the Suffolk coast. It has already received ROCs worth £2,198m, some £764m more than the net amount of £1,434m that it cost to build it. In 2025 Greater Gabbard received ROCs worth £215m and in 2026/27 is being subsidised at a rate of almost £139/MWh. In the financial year ended 31 March 2023, Greater Gabbard paid dividends of £251m. The latest accounts show dividends of £204m in FY2024 and £156m in FY2025. The company has no debt and is holding no cash on the balance sheet to fund decommissioning liabilities with a current value of £99.5m. According to the Crown Estate, Greater Gabbard is owned 50:50 by SSE Renewables and German energy giant RWE. This means that subsidies are being extracted from UK billpayers and half the profits are going abroad. There can be no justification for continuing to pay subsidies to a wind farm that has already received more subsidies than its build cost. This wind farm has certainly been overcompensated.

West of Duddon Sands (WODS) is a 389MW offshore wind farm off the coast of Cumbria. WODS has collected £1,772m in ROC subsidies since it began collecting certificates in 2014, some £638m more than the net cost of £1,134m to build the windfarm. WODS received ROCs valued at £196m in 2025. In 2024, WODS was owned 50:50 by Orsted and Scottish Power Renewables (part of the Spanish Iberdrola Group). In 2024, Orsted was paid a dividend of £210m (2023 – nil) and Scottish Power was paid £97.3m (2023 - £57m). Again, subsidies are being extracted from UK billpayers and all the dividends are ultimately being sent abroad. Again, overseas investors are being over compensated. We should note that in 2025, Orsted sold a 24.5% stake in WODS to funds managed by Schroders Greencoat.

London Array is a 630MW offshore windfarm located off the Kent coast in the Thames estuary. London Array has received certificates worth over £2.9bn since collecting its first certificates in 2012. In 2025 the wind farm received certificates worth about £294m and in 2026/27 will be receiving two ROCs per MWh generated meaning it will be receiving nearly £139/MWh in subsidies. The ownership structure is complex, with the assigned company London Array Limited reporting only abbreviated accounts. However, back in 2013, London Array was 30% owned by E.On Climate and Renewables UK London Array Limited (now trading as RWE Renewables UK London Array Limited and owned by RWE). We can infer from those accounts that the net cost of building the windfarm was £2.3bn and London Array has received £622m more in subsidies than the net cost to build it. In 2024, RWE Renewables UK London Array Limited paid £138m in dividends (2023: £35m), implying the full dividend for London Array Limited was £460m in 2024 and £117m in 2023. Other owners of London Array are Greencoat London Array Limited, (25%), Canadian investment group Caisse dépôt & placement Québec (25%) and UAE investment group Masdar (20%). This means that 75% of the dividends are again overcompensating overseas investors.

Interestingly, TRIG’s Annual Report 2025 (p27) says:

“A longer‑term RO wind‑down plan was first signalled during the Electricity Market Reform (“EMR”) in 2014, which gave the UK Government power to replace traded ROCs with Fixed Price Certificates (“FPCs”) bought by a central counterparty after 1 April 2027.”

This looks like a massive opportunity to replace ROCs with Fixed Price Certificates with a nugatory value of 1p or £1, effectively ending the Renewables Obligation Scheme. That would put an end to overcompensation overnight.

CfD-Funded Offshore Wind Farm Subsidies

A similar picture emerges when looking at the early CfD-funded offshore wind farms as shown in Figure 2.

Figure 2 - CfD-funded Offshore Wind Farms Receiving the Highest Subsidies

Although only one of the CfD-funded wind farms has received more subsidies than it cost to build it, these projects are newer and have had less time to collect subsidies. All of them are on track to receive more subsidies than their net build cost over the next few years.

Dudgeon is a 395MW windfarm off the coast of Norfolk. By the end of March 2026, it had collected £1,510m of subsidies, with £278m of those being paid in 2025. This compares to £1,217m gross and £967m net costs of building it according to the 2018 accounts. Dudgeon is 35% owned by Norwegian energy group Equinor, 35% by UAE investment group Masdar and 30% by Chinese group CRC New Energy. Dudgeon paid £60m of dividends in 2023 and a further £90m in 2024 even though it is still sitting on over £1bn of short- and long-term debt. Again, UK billpayers are being fleeced to fund dividends that are ultimately going abroad.

Walney Extension is a 660MW offshore wind farm close to the original Walney I and Walney II windfarms off the coast of Cumbria. Walney I & II have received a total of £1,870m in ROC subsidies up to the end of 2025. Walney Extension has received a further £2,199m in subsidies to the end of March 2026. This compares to the total build cost of £3,041m and the net cost of £2,498m after the £543m cost of the OFTO asset has been deducted, as per the 2019 accounts for 2018. Walney Extension received £341m in subsidies in 2025 and at that rate will have received more subsidies than the net cost of building the wind farm before the end of 2026. Again, this wind farm is largely foreign-owned (troubled Danish renewable energy group Orsted, Danish pension funds and Canadian fund manager Brookfield) so the profits from this venture will also be leaking abroad.

The other windfarms, Beatrice, Burbo Bank Extension, East Anglia 1 and Hornsea 1 are all on track to receive more subsidies than it cost to build in the next few years, well before the subsidy period expires.

Conclusions

The Government is tinkering at the edges of renewables subsidies to allegedly tackle overcompensation, but entirely missing the big picture.

On the one hand, Miliband is taking away subsidies by reducing the indexation rate and cutting CPS while the other hand is giving back by offering WCfDs to ROC-funded generators to guarantee their income. I hear on the grapevine that DESNZ officials are seeking to make Miliband’s Clean Power 2030 plans bombproof to an incoming Reform or Tory government. These WCfDs would fit with that because they would neuter Tory plans to abolish the Emissions Trading Scheme (ETS) which is an even bigger carbon tax on gas-fired electricity than CPS. Presumably WCfDs would continue to pay the agreed rate even if ETS was removed from wholesale prices, thus giving further support to ROC-funded units. The new WCfDs should be opposed, not least because they will restrict the actions available to an incoming anti-Net Zero government.

The Tory party is already committed to ending ROCs if they come to power. It seems likely that Reform would do the same. This analysis gives extra weight to their stance. It is simply unacceptable for overseas investors to be overcompensated to profit off the back of UK bill and taxpayers when subsidies have already paid out more than the original build cost. ROCs should be abandoned as soon as possible by replacing them with Fixed Price Certificates of only nugatory value.

What to do about existing CfDs is tricky. The vast bulk of subsidies goes to the half-dozen or so projects awarded contracts in the original investment round and AR1. These contracts are well protected by law from discriminatory action. However, natural justice would suggest it is unjust for a company to receive more in subsidies than the cost of building the wind farm. That would be another example of over-compensation. Wind farms should be able to generate enough cash from the open market to pay interest on the initial capital and operating costs once the original capital has been repaid. Perhaps a non-discriminatory law could be passed to limit all subsidy schemes to a maximum of the net build cost of the project. These projects have already received more than enough subsidy.

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