DECC postpones next Contracts for Difference auction
On the same day as announcing that solar power subsidies will be cut, DECC has confirmed it will postpone the next Contracts for Difference (CfD) auction for large renewables projects.
The CfD scheme, which awards subsidy contracts for green energy developers, will not be undertaken in October as planned.
Rather than making an official announcement, the Department is informing renewable energy developers when asked, with an emailed statement that reads: “There will be no CfD round this October. In the autumn, the Government will set out its plans in respect of the next CfD allocation round.”
When asked by edie when the next CfD auction will take place, a DECC spokesperson said: “There are no more details to provide at this time.”
The Government’s new CfD scheme sees renewable energy developers compete with each other in reverse auctions to win subsidy contracts. The mechanism guarantees a payment to renewable energy developers in case of a market shortfall.
The first auction took place in February, with 27 projects receiving more than £315m. The then 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”.
But, with speculation mounting regarding the second CfD round not being undertaken this autumn, the mechanism was discussed during Amber Rudd’s first Select Committee hearing yesterday, as she answered crucial questions on the Government’s approach to renewable energy subsidies.
When pushed for detail on the next CfD round, Rudd said: “I will be making announcements on the CfD but that won’t be for a little while. The EMR has to be delivered within the framework of making sure we look after consumers’ bills.”
In the same discussion, DECC’s Permanent Secretary Stephen Lovegrove said: “We’ve been able to have an auction for renewable projects and that is clearly the way in which we are going to have to continue with bringing renewables forward because we do need to keep an eye on the costs.”
In the dark
But with the CfD scheme proving essential in underpinning big capital investments in renewables, the postponement of this year’s auction, and this lack of clarity over future dates and budgets, leaves the industry in the dark about if or when companies will be able to bid for a contract for their power.
Following yesterday’s hearing, chair of the Energy and Climate Change Committee, Angus Macneil, said: “Energy developers seeking support under the Contracts for Difference scheme will now be left waiting for DECC to announce its plans for future CfD allocations. It is important that value for money is at heart of decision making on energy, but removing this certainty today actually risks raising the cost of capital, thus slowing down the steep cost-reduction pathway of technologies that will be needed in the next decade.”
Scottish Renewables chief executive Niall Stuart believes the CfD auction postponement will result in a “freezing of project development”. Stuart said: “There is now so much uncertainty across the whole sector that developers of almost every technology will be hitting the pause button on planned projects, resulting in a hiatus in the industry’s growth, and a slowdown in jobs and investment.”
“It is vitally important that we get an announcement in the autumn to provide some clarity to the sector on the Government’s intentions between now and the end of the decade or we risk significant investment – and the jobs and environmental benefits that would bring – going elsewhere.”
This is the latest in a series of blows to the renewable energy industry. Earlier today, DECC announcement fresh proposals to cease financial support for solar and biomass conversion plants, and amend the feed-in tariff (FiT) scheme for smaller projects.
In the three months since the election, the Tories overseen the scrapping of a tax exemption for renewable energy, the end of subsidies for onshore wind, a budget cut for DECC and the selling off of the Green Investment Bank.
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