Total CfD Subsidies Hit £10bn
As the costs of CfDs hit near record high in FY2024/25, the outlook is for even higher subsidies.
Introduction
I keep track of the payments made under the Contract for Difference (CfD) subsidy scheme using data from the Low Carbon Contract Company (LCCC). Near the end of March, the total payments to CfD-funded generators passed the £10bn barrier (see Figure 1).
Now the financial year to the end of March is over, we can take a look at some of the other interesting facts buried in the data.
Full Year Subsidies
Figure 2 shows the CfD subsides for each fiscal year since the scheme began in late 2016, broken down by technology type.
Financial year 2024/25 was the second most expensive year so far, with total subsidies reaching £2.24bn. Offshore wind received slightly less subsidy (£1.68bn) than the prior year (£1.72bn). The biggest driver of extra subsidy in 2024/25 was biomass conversion, a euphemism for burning trees. Biomass subsidies including biomass with CHP were £500m, up from £19m in the prior year. Onshore wind received £58m and the solar farms with active CfDs received almost £0.6m
Top-20 Subsidy Days
The all-time Top-20 subsidy days since the scheme began are shown in Figure 3 below.
All but two of the top subsidy days happened in FY2024/25, with the other two occurring in December 2023. The day with the highest subsidy payments was 22 December 2024, with over £20m paid out in a single day. Offshore wind was the main recipient of this Government mandated largesse on that day, getting over £18.2m with biomass and onshore wind receiving over £1m each.
The record subsidy days in December last year came despite elevated gas prices pushing up the reference price. The annual indexation of CfD strike prices with inflation means that as each year progresses, we are likely to see many more record subsidy days, especially if gas-prices fall back to more normal levels. More on this below.
Top CfD Subsidy Recipients
We can also see the top recipients of the subsidy largesse last financial year and the all-time Top-10 list in Figure 4 below.
Six of the all-time Top-10 recipients are offshore wind farms. Walney has received the most at £1.83bn, with Hornsea Project 1 coming in second at £1.78bn. In third place is Drax that has been paid £1.65bn in subsidy for burning trees. The other offshore wind farms in the Top-10 are Dudgeon, Beatrice, Burbo Bank Ext and East Anglia One. Lynemouth and Teesside Biomass plants also make the Top-10 along with the Dorenell onshore windfarm.
The FY2024/25 Top-10 shows a similar picture, with Hornsea 1 and Walney swapping places. Triton Knoll makes it into the Top-10 for 2024/25, receiving £73.9m. The reason it does not make it into the all-time Top-10 is because it paid back money in 2021/22 and 2022/23 during the energy crisis.
Generation
We can now explain why subsidy payments are rising again. To begin with, we can look at total generation as shown in Figure 5.
Generation hit an all-time high in 2024/25, with a substantial increase in offshore wind generation to another annual high due to the activation of the CfDs for Hornsea Project 2 and Moray East in March 2024. Biomass and Biomass with CHP also saw considerable increase in output. Onshore wind output was up marginally. At the beginning of the financial year there were only two active solar power CfDs. During the year these were joined by Litchardon, Bishampton and Alfreton solar farms, with Monica Solar activating its CfD on the last day of the financial year. These extra sites led to CfD-funded solar generation more than doubling to 43.5GWh, but this is still a drop in the ocean compared to the total CfD output of 32.9TWh.
CfD Strike Prices
Strike prices represent the total amount that CfD-funded renewables generators receive. As can be seen in Figure 6, strike prices rise over time as they get indexed up with inflation in April each year.
The strike price for Biomass has gone up each year since 2016/17, rising from £106/MWh to over £140/MWh in 2024/25. A similar picture emerges for onshore wind and biomass with CHP. The exceptions are offshore wind and solar where average strike prices dipped last year as the new units mentioned above were brought online at cheaper prices. These new projects brought down the average even though the strike price of the other projects indexed upwards.
CfD Reference Prices
The reference prices, or strictly the Intermittent Market Reference Price (IMRP) represent how much CfD-funded projects receive from the market for the electricity they generate. The weighted average reference price has fluctuated a lot since 2017 as shown in Figure 7.
The charts for offshore wind, onshore and solar are all very close, so for clarity this chart shows just the intermittent reference price for offshore wind. The various flavours of biomass use a different reference price called the Baseload Market Reference Price (BMRP) that we shall deal with separately. Average offshore wind reference prices were in the range £42-56/MWh from 2017 to 2021, except for a dip down to £36 during the Covid year of 2020. Reference prices then rose in 2021/22 and peaked in 2022/23 at £156/MWh mainly due to the energy crisis that began in the second half of 2021. Prices then fell to £72/MWh in 2023/24 and rose a bit in 2024/25 to £77/MWh as energy prices rose again from September 2024. The recent fall in gas and electricity prices came too late to make much difference to the year.
CfD Subsidies Per MWh
The difference between the strike price and the reference price allows us to calculate the subsidies received per MWh of generation as shown in in Figure 8.
In 2021/2022, all intermittent technologies paid back into the system on average, with subsidies of £-0.25/MWh generated on average. However, in 2024/25 subsides were positive for all three technologies, if a little lower than the prior year.
We can see the share of market revenue and subsidy revenue for each technology in 2024/5 set out in Figure 9.
Offshore wind received subsidies of £76/MWh or about 49% of revenue. Onshore wind received £39/MWh (35%) and solar got £14/MWh (15%) 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.
Load Factors
We can also calculate the average load factor for the main intermittent technologies funded by Contracts for Difference as shown in Figure 10.
We can see a general downtrend in the amount of electricity generated compared to nameplate capacity for all three technologies. However, offshore wind achieved a load factor of just 37.8%, the lowest on record, despite new wind farms coming online. However, the average is skewed somewhat by Moray East that had a load factor of just 21.6%, probably reflecting a high level of curtailment during the year. Curtailment happens when wind is producing more power than there is demand or the grid can handle, so windfarms are asked to switch off. Although Beatrice and Hornsea 1 showed a big increase in load factor in 2024/25 compared to 2023/24, East Anglia 1, Hornsea 2 and Triton Knoll all saw significant reductions.
CfD Subsidies for Biomass Plants
Moving back to biomass plants, we can see how much subsidy they received per MWh of generation and the relationship between the subsidy rate and generation in Figure 11.
From 2016/17 to 2019/20 the subsidy for biomass plants was around £60/MWh, with a jump up to £76/MWh during Covid. The energy crisis saw subsidies fall below zero as energy prices rose, but this meant generation fell too as the subsidies on offer were not generous enough. In 2024/25, subsidies rose again to £57/MWh and generation picked up again.
Outlook for CfD Subsidies 2025/26
The outlook for CfD subsidies during this financial year will be driven by the average strike price and market reference prices. Higher strike prices and lower market prices will both tend to push subsidies upwards. Strike prices are of course indexed upwards at the start of each financial year. There is not enough data yet to produce proper weighted average prices, but the simple average strike prices for offshore wind have gone up by £4.46/MWh, biomass is up £4.16/MWh, biomass with CHP is up £5.07/MWh and onshore wind is up £3.36/MWh. Average solar prices are down over £17/MWh to £82/MWh, but solar produces so little in the scheme of things, it will not make much difference to the big picture. Overall, strike prices are up and that will increase the subsidies we pay.
What should be good news is that both gas and wholesale electricity prices have fallen dramatically from the peak in February and in particular prices have fallen since the start of the new financial year (see Figure 12 sourced from Trading Economics).
Day ahead electricity prices peaked at ~£115/MWh in February, but by Friday had fallen 39% to £70/MWh. Gas prices peaked at about 142p/therm and have fallen about 41% to 84p/therm today. With such dramatic falls, we should expect suppliers to start offering prices below the price cap, but do not hold your breath. However, the bad news is that with falling market prices CfD subsidies will increase, meaning we will not feel the full effect of the price reductions in our bill payments. It is too early to forecast what will happen to gas and electricity prices for the rest of this new financial year, but the omens are that CfD subsidies are going to increase substantially.
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The basic premise of the push for wind and solar to replace conventional power is that this can somehow or other work if enough capacity is installed, backed up by some kind of storage perhaps a combination of batteries and pumped hydro plus imports from overseas.
The premise is false and it might help to explain that instead of, or at least in addition to, elaborate statistical exercises that we see all the time which mean absolutely nothing to the politicians and the people in the street.
Charts that show the average capacity factor are seriously misleading because they could convey the impression that we just need to overbuild but the people really need to know that the system is killed during the periods when both wind and sun are at their lowest points, that is on windless nights or during the genuine Dunkeflautes when it is still and dark at the same time, even during the day.
It should not be necessary to repeat this but the combination of wind droughts and lack of grid scale storage would appear to be a decisive refutation of the case for the green transition. Wind droughts occur across all of Western Europe at the same time and so everybody else is simultaneously either overloaded with wind power or undersupplied.
The climate change committee has been exposed, blatantly lying about the prevalence of wind droughts and all of the members in the house who voted to support the suicidal legislation of 2008 and 2019 were clearly totally ignorant of the phenomenon of wind droughts and lack of grid scale storage.
Have the climate and realists mounted any serious campaigns to educate the public on those matters? Nothing is going to change until the lawmakers are subjected to demands from well informed constituents backed up by public opinion surveys to show that the public wants affordable power more than they want to see the country ruined by policies that will not make a measurable difference to the total of human CO2 emissions or the temperature of the planet.
It could make a big difference if responsible broadcasters would simply include the amount of power at the time being generated by wind and sun when they do routine weather reports on the hour.
If the Greens and their generous benefactors are such lovely, caring, determined and democratic folk, they should pay these subsidies.