By Rob Logue, Head of Energy & Infrastructure, Gneiss Energy
Following a turbulent few years, with supply‑chain bottlenecks, higher interest rates, and the rapid sector retreat of oil and gas supermajors – Allocation Round 7 (AR7) has provided offshore wind with a very welcome sense of momentum.
This latest upsized round is supporting an unprecedented 8.4GW of offshore wind capacity—equivalent to around £22bn of new investment into the UK’s clean energy transition.
This has been, in my opinion, skewed deliberately towards larger projects, close to existing infrastructure and with large integrated developers, namely RWE and to a lesser extent SSE – both organisations with strong balance sheets, proven delivery capability, and established supply‑chain relationships.
For a UK Government trying to meet challenging Clean Power 2030 targets, and a supply chain desperate for certainty, these look like project awards that are focused on deliverability and getting steel in the water as soon as possible.
However, for a supply chain hungry for firm orders, there is a concern given the concentration of awards to a small number of developers, these parties will naturally lean towards suppliers with which they have previous working relationships.
Whilst this may hold true for the Tier 1 supply chain, the absolute volume that will be built, and the likely project delivery windows from 2028-31 mean the supply chain will have to expand, with plenty of potentially opportunities to support project delivery across tiers 2 and 3.
For these firms, doing their homework will be key: RWE and SSE will have consistent patterns in how they procure and deliver projects, and their past supply‑chain choices will reveal much about their preferred contract structures, project delivery strategies, and technology partnerships.
This information is not a secret, and making the best use of this is one of the most effective ways smaller companies can position themselves strategically. If a business understands how a developer has historically delivered previous projects, it can make informed assumptions about how they will approach their next scheme.
At the same time, it is important to recognise that the supply chain is being asked to expand capacity quickly. Years of under‑investment and continuing supply chain cost pressures, compounded by global uncertainty, mean that fabrication yards, port infrastructure, installation vessels, and engineering/service resources will all come under pressure through 2028–2031.
AR7 may give the confidence needed to begin reinvesting, but the scale of the opportunity will require coordinated action between government, developers, ports and suppliers.
UK and Scottish governments have already dug deep in supporting new port infrastructure – but a strategic decision on Ming Yang (one way or the other) firm orders and a longer-term pipeline may still be required to unlock that much desired inward investment.
One big challenge around AR8 – for ScotWind schemes at least – is the perennial challenge of transmission charges (or TNUoS) which clobber northern schemes with very high and volatile transmission costs.
Already Chris Stark, the UK’s Head of Mission Control for Clean Power 2030, has signalled transmission costs won’t be resolved for AR8, with the consequences for the Scottish pipeline that will bring.
Floating prospects
Beyond the current crop of fixed‑bottom schemes, floating offshore wind remains a very interesting medium to long‑term opportunity – and represents around 6O percent of the ScotWind pipeline.
The size of the prize could be huge, with some developers pledging to build their floaters in Scotland – bringing long hoped-for local manufacturing. Yet AR7 winners represent support for developing the floating market rather than full scale commitment.
Given the technology development still under way, these projects are not cheap when compared to fixed, and therefore floating schemes will require consistent state support – both in the auction mechanism and in the supply chain –until the sector really starts to mature and scale.
Compare the UK approach with that of France, whose recent floating wind procurements adopted a markedly different strategy, with the state taking on transmission asset risk and providing a more integrated infrastructure planning framework and also indexation of the underlying CfD.
Ports, assembly areas, and grid upgrades are sequenced centrally, reducing developer risk and improving overall project bankability. By contrast, the UK’s market‑driven model, while encouraging innovation, exposes developers to grid uncertainty, transmission charging volatility, and infrastructure bottlenecks.
Positive mood
Yet despite these challenges, the overall mood post‑AR7 is unmistakably more positive than at any point in the past two years. The CfD mechanism has proven it can still deliver investment at scale and developers have demonstrated continued appetite for UK projects; whilst the decision to expand the auction budget mid-round shows that Westminster is willing to adapt to deliver capacity when it represents value for money.
This doesn’t mean that the challenges faced in 2025 have left the sector and there are still issues to face, including:
- Inflation, plus capex increases due to supply chain constraints and higher interest rates continue to challenge project economics.
- Ongoing risk of projects getting to FID given costs and constraints, and the backdrop of developers more willing to delay/walk away from projects and deploy capital elsewhere both in other geographies and in other generation technologies.
- Global political and policy uncertainty is still having an impact on activity levels especially at earlier stages of project development.
- Grid connection challenges and increasing transmission charges still have a significant impact on project viability (especially in Scotland).
- As a consequence, many ScotWind projects remain without a route to market: this means AR8 becomes hugely important for the wider UK pipeline and especially ScotWind schemes – both fixed and floating.
All that being said, the conversations across the offshore wind supply chain in the UK (and wider) have certainly been more optimistic post AR7.
The UK Government has responded to many industry concerns in the design of AR7. It is now hoped – by a supply chain hungry for certainty – that AR8 and the rounds to follow will build on this foundation with auctions designed to increase confidence and hasten more schemes, including floating, towards FID.
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