Cfd info released8 Dec 2025 18:08
AI interpretation of CFD today...
The AR7a CfD budget notice confirms that tidal stream projects like MeyGen will continue to have a dedicated route to market, but funding is modest and capped. Strike prices are set high (£371/MWh in 2024 prices), which supports viability, yet the limited Pot 2 budget (£15m per year from 2028/29 onward) means only a handful of tidal projects can realistically secure contracts. For MeyGen, this signals opportunity for incremental expansion, but not large-scale deployment without further government support.
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📊 What the AR7a Notice Means for Tidal Stream
1. Budget Allocation
- Pot 2 (where tidal sits): Only £15m per year from 2028/29 onwards.
- This is a tiny fraction compared to Pot 1 (£295m annually), showing tidal remains a niche technology in government planning.
- The budget is enough to support tens of MW, not hundreds, so MeyGen can expand but not scale to its full potential.
2. Strike Prices
- Tidal stream ASP: £371/MWh (2024 prices).
- This is deliberately high to reflect tidal’s cost profile and encourage investment.
- It ensures projects like MeyGen can bid competitively and still cover costs, but it also highlights tidal’s relative expense compared to solar (£75/MWh) or onshore wind (£92/MWh).
3. Policy Context
- The government has maintained a ringfenced pathway for tidal stream since AR4, recognising its predictability and grid-balancing role.
- However, the scale of support is cautious—tidal is treated as an innovation technology, not yet mainstream.
- Marine Energy Wales and UKMEC note this is a “double-edged sword”: prices are supportive, but budgets are restrictive.
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⚙️ Implications for MeyGen
- Incremental Growth: MeyGen has already secured CfD support for 28MW expansion. AR7a allows further bids, but only within the £15m cap.
- Pipeline Constraint: MeyGen’s long-term ambition (hundreds of MW) cannot be realised under current budgets.
- Strategic Positioning: By winning successive CfDs, MeyGen strengthens its role as the UK’s flagship tidal project, building credibility for future larger allocations.
- Risk: If government does not expand Pot 2 budgets beyond £15m/year, MeyGen risks plateauing at demonstration scale rather than commercial scale.
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⚠️ Risks & Trade-Offs
- Funding Ceiling: £15m/year limits sector growth; tidal remains dependent on political will.
- Competition: Other tidal projects (Morlais, Orbital O2) will compete for the same small pot.
- Grid Integration: While tidal is predictable, its high cost compared to wind/solar may limit appetite unless balancing costs are factored in.
- Policy Shifts: If government increases tidal ringfence in AR8 or AR9, MeyGen could accelerate; if not, growth will be slow.
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✅ Takeaway for Investors
- Short-term (2025–2030): MeyGen can secure incremental CfDs and expand capacity modestly.
- Medium-term (2030+): Without a bigger ringfence, tidal wil
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