Government ringfences £265m for next Contracts for Difference auction

The UK Government has today (13 September) confirmed that up to £265m will be funnelled into the next Contracts for Difference (CfD) auction round, a record amount of money aimed at spurring uptake in clean energy deployment including offshore wind, solar and tidal technologies.

Government ringfences £265m for next Contracts for Difference auction

The £265m earmarked for the next auction is the biggest yet

The £265m CfD auction will take place later this year, according to the Government. It will see £200m invested into offshore wind projects, helping to meet a Government promise of ensuring the UK has 40GW of capacity by 2030.

An additional £55m will be made available to “emerging renewable technologies”, with £24m of that ringfenced for floating offshore projects for the first time. The remaining £10m will be used to support technologies such as onshore wind and solar.

Energy Minister Anne-Marie Trevelyan said: “The CfD scheme has helped the UK become a world leader in clean electricity generation and lowered prices for consumers.

“The new plans set out today deliver on the Prime Minister’s Ten Point Plan and will support the next generation of renewable electricity projects needed to power our homes and meet our world-leading climate change targets.”

Historic progress

Last year, the Government confirmed plans to double the amount of renewable energy procured through its CfD scheme, with 12GW of wind and solar energy being targeted.

The CfD scheme will open in late 2021 and will aim to double the 5.8GW of renewable capacity procured in the previous round. Up to 12GW of renewables are being targeted to assist with the nation’s net-zero emissions target for 2050.

The number of technologies supported by the scheme will also be expanded in the latest round, with offshore wind, onshore wind, solar, tidal and floating offshore wind projects all eligible to bid. It marks the first time that floating offshore has been eligible for the scheme and the first time since 2015 that onshore wind and solar have been included.

In March last year, the Government reversed its decision to effectively ban onshore wind, solar and energy storage from competing in the CfD rounds, following calls for a review to its renewables policy framework in light of the net-zero target.

In 2017, 11 energy projects worth £176m annually were awarded contracts in the auction. Three offshore projects, the 1.4GW Hornsea Project Two, the 860MW Triton Knoll farm and 0.95GW Moray Offshore Windfarm (East), representing 3.2GW of new capacity, were awarded contracts.

The Moray and Hornsea projects were issued contracts with a record strike price of £57.50 per MWh, while the Triton Knoll project gained one at £74.75. With assistance from CfD auctions, the price of offshore wind has been reduced by around 65% in the UK.

Reacting to today’s CfD announcement, Environmental Audit Committee Chairman, Rt Hon Philip Dunne MP, said: “The UK has the geographic good fortune to be a renewables powerhouse. I am delighted to see that the potential of floating offshore wind and of tidal stream have finally been recognised as contributors to our future low-carbon energy mix. This support for renewable energy will help Net Zero Britain, provide welcome demand signals to investors, and give industry the confidence it needs to secure the skills for the future.

“While this investment is extremely welcome, the Government must also evaluate the infrastructure supporting renewable energy. The investment can only do so much if the infrastructure cannot support the projects hoping to be achieved. Our Committee has highlighted in our work on technological innovations that the connection of expanding offshore wind farms to the grid must be reviewed and that adequate investment is required for deep water port capacity.”

Law firm Shakespeare Martineau’s senior partner and head of energy Andrew Whitehead added: “This new scheme will allow established renewable technologies, including onshore wind and solar, to bid into the CfD auction, for the first time since 2015. The auction will enable renewable energy developers to compete for a share in a £265m subsidy pot.

“With COP26 nearly here, there continues to be an increase in activity across sectors in the low carbon arena. This investment support will make it easier for UK businesses that are developing renewable sources of electricity to make the necessary leap of faith to meet the Government’s ambitious climate targets.”

Matt Mace

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