Last month we created final clearing price estimates for onshore wind and solar in our 'AR7 Strike Price - Market Assessment' report.
In our original white paper we considered key changes between AR6 and AR7, which would contribute to a change in strike price. As the pot 1 budget - which contains onshore wind and solar among several other tech types - for AR7 was not yet released, our previous model assumed a similar budget as in AR6.
The budget is now released and totals £295 million (2024 money). This is an increased budget compared to AR6 - £37 million in 2024 money - which will likely cause an upwards shift in the strike price, and an increase in capacity procured by the scheme.
The government has allocated a minimum of £160 million to onshore wind and remote island wind, which suggests solar can receive up to £135 million.
We explored the impact a similar increase in the AR6 budget would have had on the resultant strike price and capacity. Naturally, the amount of new capacity strongly depends on the increase in strike price. If there is an upward change in strike price all previous projects are more expensive to subsidise, hence a smaller part of the additional budget would go towards new capacity.
Assuming competitive bids and the cost-benefit of increasing the budget, we increased the AR7 forecasted strike prices by 1.375% for onshore wind and 1.198% for solar.
