The UK government has announced a record 8.4GW offshore wind auction but with no involvement from listed infrastructure funds struggling with deep share price discounts and a shortage of capital.

US private equity group KKR and German utility RWE were the main winners alongside the UK’s SSE (SSE) and Copenhagen Infrastructure Partners in the UK’s seventh allocation round (AR).

The Labour government said this laid to rest the “fiasco” of the fifth round under the Conservatives that failed to raise any bids for offshore wind projects. The Department for Energy Security and Net Zero said the successful tenders would unlock £22bn in private investment and support 7,000 jobs around the UK.

Officials ensured there would be developer interest by paying higher inflation-linked strike prices than the benchmark 2012 rates. The department said this represented a good deal for tax payers as the new cost of fixed offshore wind projects in AR7 was an average £90.91 per megawatt hour, or £65.25 in 2012 prices. That was 40% cheaper than the £147 per megawatt hour cost of building and operating a new gas-fired power station.

Energy secretary Ed Miliband claimed it was a “monumental step” towards achieving clean power for the country by 2030.

“This is a historic win for those who want Britain to stand on our own two feet, controlling our own energy rather than depending on markets controlled by petrostates and dictators,” said the former Labour leader.

KKR joins up with RWE

KKR has taken a 50% stake in RWE’s Norfolk Vanguard East and West development projects in the North Sea which were awarded contracts of 3.1GW and should generate enough electricity to power around 3m homes.

“By combining KKR’s investment know-how in large-scale, complex infrastructure projects with RWE’s extensive offshore wind expertise, we are well positioned to jointly realise these major projects,” said RWE chief executive Markus Krebber.

Closing of the KKR partnership and project financing are expected in the summer with the commissioning due in 2029 for Norfolk Vanguard West and 2030 for Norfolk Vanguard East.

The two companies said they may decide to extend their collaboration in future.

With its two Dogger Bank South and Awel y Môr offshore wind development projects, RWE won a combined capacity of 6.9GW in the auction, or 83%. The two Dogger projects are being developed with Masdar, the UAE renewables company under an agreement signed in 2023. Awel y Môr is an extension of the existing Gwynt y Mor offshore wind farm off the north Wales coast in the Irish Sea which is jointly owned by RWE, Stadtwerke München and Siemens. 

SSE and other bidders

London-listed SSE won a 20-year contract for 1.4GW of power from phase B of its Berwick Bank wind farm project in the outer Firth of Forth east of Scotland. It will receive a guaranteed strike price of £89.49/MWh based on 2024 prices, but annually indexed with CPI inflation. A final investment decision is expected in 2027.

Pentland Floating Offshore Wind Farm, which is majority owned by a fund managed by Copenhagen Infrastructure Partners, won a small 92.5MW contract. It is being developed with GB Energy, National Wealth Fund, Scottish National Investment Bank and Eurus Energy of Japan, with Hexicon AB of Sweden a minority shareholder.

The closest link between one of the dozen contracts awarded today and a London-listed renewables fund was Erebus, a 100MW test floating offshore wind project in the Celtic Sea south of Ireland. Its lead developer is Blue Gem, part of the Simply Blue Group, from which Octopus Renewables Infrastructure (ORIT) sold a majority stake to Kansai Electric Power Company of Japan in October.

Transmission link

Despite the lack of participation by UK renewables funds, QuotedData’s James Carthew believed the expansion of offshore wind was positive for the offshore transmission links (OFTOs) in which HICL Infrastructure (HICL) and International Public Partnerships (INPP) have invested.