CfD auction: What it really means for renewables…
The first wave of the Governments new Contracts for Difference (CfD) scheme was announced today, with 27 projects receiving more than £315m.
Energy Secretary Ed Davey said the first round of the auction process gave a massive boost to home grown clean energy at the best possible price for consumers.
However, industry insiders were less effusive; raising concerns abouth the relatively small pot of money, and the lack of policy certainty going forward.
To shed some light on the issue, here are five things you need to know about the CfD auction and what it means for renewables:
1) The Government has missed some easy opportunities
– That’s according to the REA, which lamented that no resources have been allocated to converting coal fired power stations to clean biomass sources (‘biomass conversions’).
– “This is a quick to deploy, cost-effective method of securing large amounts of flexible capacity at a time when the UK faces a potential generating shortfall in the short term and having contracted such significant amounts of fossil fuel generation in the Capacity Market”.
2) Renewables are getting cheaper
-The lowest strike price came in from solar at £50/MWh, a 58% reduction over previous prices.
-That price – if it can be delivered – is similar to the generation costs of gas on the open market.
-Offshore wind saw a reduction of 18% over previous prices, and onshore wind price fell by 17%.
-If the same 27 contracts had been handed out without the auction, it would have cost an extra £110m, according to Decc.
-Greenpeace chief scientist Dr Doug Parr said: “Today’s announcements show renewables’ costs are plummeting and will mount a growing challenge to conventional sources of power in delivering energy security for the UK.
“We’ve known onshore wind is much cheaper than nuclear for a while, but now we learn that solar power is already cheaper than new gas generation in some cases. It makes you wonder what could have been achieved with less party-political manoeuvring and more stable Government support for the clean technologies already being embraced by the world’s largest economies.”
3) Windpower is still the dominant technology
-Onshore wind received more than half of all the allocated contracts (15 out of 27), while the two offshore wind projects will account for more than half of all capacity.
Delighted TWO offshore wind farms won contracts – expected only one: helped by cost falling nearly 20%! UK is global offshore wind leader!
— Edward Davey (@EdwardDaveyMP) February 26, 2015
4) The solar industry feels hard done by
– Before the results were even announced, the STA released a statement saying it was unfair that large-scale solar had been shifted from the Renewables Obligation (budget of £3.4bn in 2014/15) to the ‘established technologies’ category of the CfD (budget of £50m).
– Only five solar projects received contracts, and even successful bidders raised concerns about making the project profitable, thanks to the low ‘strike price’.
– Alex Fornal, head of project development at Solar company Juwi, who made three competitive bids said: “For us the results speak for themselves. Wind has apparently taken all or most of what was an already a miniscule CfD budget. If there were any successful solar farms they have taken up whatever ‘crumbs’ were left over after wind projects were granted CfDs.”
5) Biomass producers also feels marginalised
– Two CHP projects received contracts totalling around 94MW.
– But director of the Association for Decentralised Energy Director, Dr Tim Rotheray, said: “Unfortunately, the design of the scheme currently makes biomass CHP near-uninvestable, preventing many potential projects from participating in today’s auction, limiting the options for industry to invest in their future competitiveness.
“For industrial sites which use large amounts of heat and power, highly efficient biomass CHP is one of the few options for delivering emissions reductions, cost savings and improved competitiveness.
“Developing new policies can be a challenging process and today’s auction shows Government needs to support industrial competitiveness by improving certainty for biomass CHP schemes in future allocation rounds
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