Contracts for Difference: Solar struggles, onshore wind surges ahead

In an announcement on Thursday morning, the Government handed CfDs to 15 onshore wind projects, five to solar, three to Advanced Conversion Technologies (energy from waste), two to CHP and two to offshore wind.

— See the full list here —

The CfDs – for large scale renewable projects – guarantee a ‘strike price’ for each MWh of power produced for the next 15 years. In total, 2.1GW of capacity has been procured, at a total cost of £315m.

Energy Secretary Ed Davey said: “This world leading auction has delivered contracts for renewables projects right across the UK. These projects could power 1.4 million homes, create thousands of green jobs and give a massive boost to home-grown energy while reducing our reliance on volatile foreign markets.

“The auction has driven down prices and secured the best possible deal for this new clean, green energy.”

Intra-sector debate

The auction has proved controversial for individual trade bodies within the sector, with the Solar Trade Association (STA) calling the announcement: “disappointing but predictable”. The auction system is unfair, according to the STA, because it requires large-scale solar to compete on price with much more developed technologies.

STA CEO Paul Barwell said: “Unfortunately this result is as disappointing as we predicted. The soon to be cheapest and most popular renewable – solar power – has lost out in a complex auction scheme that favours big players and genuinely established technologies.

“Is a policy that trips up the UK’s emerging solar industry really a successful policy? We don’t think so. It is essential that changes are made to the next round of auctions in October to ensure that smaller UK solar companies can have the confidence to enter.”

“It is likely that very few solar companies even submitted a bid for a contract. The problem is that it was just far too much of a risk for a small or medium sized solar company to even put in a bid for a Contract for Difference. The system was a bit like asking first time buyers to put down on deposit on a house, without knowing whether they were going to be able to buy the house at the end of the process – and with the risk of losing their deposit.”

Wind reaction

Renewable UK – which represents wind and marine energy specifically – was predictably more upbeat about the auction, praising the low energy prices it generated.

RenewableUK chief executive Maria McCaffery said: “We are pleased to see these projects – which between them could power over 1.2 million homes and create substantial numbers of jobs, and much needed investment in our communities – moving forward.

“The highly competitive prices achieved during this Auction, highlight the fact that the industry has been working hard to bring costs down, both onshore and offshore. The prices achieved by the onshore industry show what utter folly it would be to choke off this low cost form of low carbon power and the results also demonstrate that the offshore industry, provided the conditions are maintained, is well on the path to achieving its stated aim of £100/MWh by 2020.”

Technology splits, by capacity

Big day for independent generators – #CfD results announced! Interesting technology split by capacity: pic.twitter.com/neX3sl8dGu

— SmartestEnergy (@SmartestEnergy) February 26, 2015

Northern leading-lights

On a geographical basis, Scotland reinforced its position as the UK’s most prolific clean energy generator, as the site of 11 of the 27 successful projects.

Specifically, 10 of the onshore wind projects will be constructed in Scotland, with the technology now around 10% cheaper than new nuclear power, according to Scottish Renewables.

Countries by capacity

#CfD results day – winners by country: pic.twitter.com/vSmx82pZms

— SmartestEnergy (@SmartestEnergy) February 26, 2015

 Whats next 

The industry was united in calling for clear signals from Government on price and volume going forward.

Renewable UK’s Mcaffery said: “It is vital that the new Government moves quickly to clarify process around the next awards. A level of certainty about both immediate future allocation rounds, but also the long term vision of decarbonised electricity, and the support needed for it, will ensure projects keep coming forward, at the right price.

“The industry has really extended itself today on the cost reduction agenda, and Government needs to respond positively with a clear signal about future rounds and long term support, to enable the continued development of low carbon power at a good price”.

The STA’s Barwell urged Government not to let solar “slip through the cracks”.

“Internationally Governments are recognising and supporting solar’s vast global potential. Having come from nowhere on solar at the start of this Parliament the UK cannot afford to fall behind,” he added.