Government unveils increased support for renewables, commits to coal phase out

The UK Government has reinforced its commitment to upgrade the UK's energy infrastructure, outlining plans to provide £290m support for renewable energy projects and phase out unabated coal power generation by 2025.

Business and Energy Secretary Greg Clark has today (9 November) confirmed that the second Contracts for Difference (CfD) auction, taking place in April 2017, will produce enough renewable electricity to power around one million homes and reduce carbon emissions by around 2.5 million tonnes per year from 2021/22 onwards.

The next allocation round is for technologies such as offshore wind, anaerobic digestion (AD), combined heat and power (CHP), and wave, tidal stream and geothermal projects. The Government expects the auction to deliver cheap green energy for investors. The maximum price for offshore wind projects, for instance, is now 25% lower than was set for the last auction, and a competitive auction could further reduce that cost.

The announcement arrives as the Government issues a consultation phase out electricity generation from unabated coal-fired power stations within the next decade.

Clark said: “We’re sending a clear signal that Britain is one of the best places in the world to invest in clean, flexible energy as we continue to upgrade our energy infrastructure.

“This is a key part of our upcoming Industrial Strategy, which will provide companies with the further support they need to innovate as we build a diverse energy system fit for the 21st century that is reliable while keeping bills down for our families and businesses.”

Confidence boost

The news comes a week after it was revealed that the amount of electricity generated from UK coal power stations is on track to fall by two-thirds this year, a decline which analysts said was so steep and fast it was unprecedented globally.

The Government’s much-anticipated consultation plans have been welcomed by academics and green campaigners alike, with an overriding sense that the decision will accelerate investment and improve investor confidence:

University College London (UCL) professor of international energy and climate change policy Michael Grubb said: “Outlining how and when coal plants will cease to operate will pave the way for new investment, including gas. Coal is already struggling economically and removing coal clarifies the market space for gas during the 2020s.

“Overall reinforcing the existing commitments and clarifying mid-term plans increases investor confidence, so certainty on coal-phase out will help to bring forward new and cleaner capacity.”

Grubb’s views were echoed by Friends of the Earth climate campaigner Guy Shrubsole, who said: “Coal is a dirty, inefficient and climate-wrecking fuel that belongs in the past. The Government’s move to consult on its commitment to phase out coal is a good, positive development.”

Onshore uncertainty

The second CfD auction reflects the Government’s pledge to spend £730m of annual support on renewable electricity projects over this Parliament. The first round of CfDs took place in February last year, with the first batch of sustainable energy projects receiving more than £315m – a figure initially criticised by green industry insiders as being “relatively small”.

The new auction provides little comment on access to financial support for technologies such as onshore wind – which could serve to further drive away many potential onshore wind investors.

Commenting on the announcement, manufacturers’ organisation EEF’s senior energy policy adviser Richard Warren said that further details on the next CfD auctions are helpful to build confidence for investors in the energy market, a crucial factor bringing forward vital future infrastructure investment. “Beyond this auction, however, we would expect to see plans for a more technology neutral approach,” Warren said.

George Ogleby

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