The CfD scheme ensures renewable energy projects receive a guaranteed price from the government for the electricity they generate, encouraging continued investment in the UK.

The maximum strike price has been increased by 66% for offshore wind projects, from £44/MWh to £73/MWh, and by 52% for floating offshore wind projects, from £116/MWh to £176/MWh ahead of Allocation Round 6 (AR6) next year.

According to the UK Government, this will help ensure projects are sustainably priced and economically viable to compete in AR6, building on the success of previous CfD auctions. These have so far awarded contracts totalling around 30GW of new renewable capacity across all technologies since 2014.

In AR6, offshore wind will also be given a separate funding pot in recognition of the high number of projects ready to participate. This will ensure healthy competition among a strong pipeline of projects, helping the UK deliver on its ambition of up to 50GW of offshore wind by 2030, including up to 5GW of floating offshore wind.

First established nearly a decade ago, the CfD has helped reduce the cost of renewables. It aims to deliver good value to electricity consumers and drive down costs. The government’s ambitions will create tens of thousands of new jobs by 2030, while also delivering the Prime Minister’s priority of growing the economy.

Claire Mack, chief executive of Scottish Renewables, said: “Scottish Renewables has repeatedly warned of the cost pressures and increased challenges facing our industry so we’re pleased the UK Government has responded by delivering administrative strike prices which should go a long way to restoring investor confidence in the Contracts for Difference scheme as a viable route to market for offshore wind.

“Today’s announcement is important because in addition to the social, environmental and economic benefits that renewable energy projects can offer, bringing forward more of these developments will not only deliver affordable electricity and savings to bill-payers but will improve energy security and reduce consumer exposure to high, volatile gas prices.

“Make no mistake renewable energy is the cheapest way of generating electricity. A diverse technology mix will be crucial for meeting our net-zero targets so the increase in administrative strike prices for renewable energy technologies other than offshore wind is also welcome.

“Following the disappointing result of Auction Round 5, Scottish Renewables urged the UK Government to provide offshore wind with a separate funding pot in Allocation Round 6 to reflect the high number of eligible projects, so we are pleased that the government has listened to our calls. This separate pot should be retained for future auction rounds to secure the delivery of the vast ScotWind pipeline.

“However, whilst welcome, today’s announcement will not by itself ensure the success of this allocation round of the Contracts for Difference scheme. It is therefore essential that the UK Government provides a budget for Allocation Round 6 that aligns with Scotland’s renewable energy ambitions by maximising the number of projects successful in winning contracts to deliver clean power for consumers.”

Keith Anderson, chief executive of ScottishPower, said: “Bringing more green energy onto the system is the single most important thing we can do to cut customers’ bills and strengthen our energy security. This is a welcome signal that the Government is listening and is committed to getting the UK’s pipeline of offshore wind projects moving again.

“The real test of that ambition will come when the overall budget for the next auction round is set next year. But, no doubt about it, this is a step in the right direction.”