The UK government awarded a record 8.4 gigawatts of offshore wind capacity in Allocation Round 7. RWE emerged as the largest winner with 6.9 GW, while SSE secured 1.4 GW. Orsted, the current leader in the UK market, did not secure any capacity. The average contract for difference is £91 per megawatt-hour in 2024 prices, inflated for a 20-year period versus 15 years previously.

RWE created a joint venture with KKR to develop the 3.6 GW of awarded projects where it had no partner. The awarded net capacity of RWE is 3.56 GW. Orsted was the loser in this auction due to its US woes and abandoning the Hornsea 4 project. Incorporating the value creation of awarded projects boosts RWE’s fair value estimate by EUR 8 to EUR 53 per share.

RWE’s additional offshore wind investments reduce the likelihood of more share buybacks. SSE is expected to farm down 50% of the 1.4 GW Berwick Bank B project it was awarded. The amount of awarded offshore wind capacity in AR7 is the largest ever, with limited risk of project cancellations due to the generous subsidy price. This auction offered relief to the offshore wind industry after several failed auctions in other countries.

Read more at Morningstar: RWE, SSE, Orsted: UK Doubles Down on Offshore Wind, and RWE Is the Biggest Winner