RenewableUK unveils manifesto for decarbonising power system by 2035, calling for CfD reform

Industry body RenewableUK is warning that the UK Government’s ambition to fully decarbonise the national power system by 2035 won’t be met without changes to auction schemes and better planning to increase the number of people qualified to work in renewables.

RenewableUK unveils manifesto for decarbonising power system by 2035, calling for CfD reform

Pictured: Wind turbine installation at Hornsea 2. Image: Orsted

The warnings are being made in the form of a new manifesto published by RenewableUK today (22 June). This document outlines the areas in which the industry is making good progress towards the 2035 goal and where policy gaps remain.

Under the commitment – first confirmed by Ministers last autumn and reiterated in the Energy Security Strategy this spring –  the Department for Business, Energy and Industrial Strategy (BEIS) is striving to end unabated fossil-fuelled electricity generation. Renewable and nuclear generation will need to be scaled up, as will large-scale energy storage. Coal power plants will need to come offline by October 2024 and, by the end of 2035, all gas power plants will need to deal with their emissions using carbon capture and/or offsetting.

RenewableUK’s manifesto states that, while BEIS’s sector-specific targets on increasing the deployment of nuclear and renewables are welcomed, there is still much more to do to make sure they are delivered, unlocking capital and innovations and properly planning for scaling the workforce.

The report calls meeting the Government’s ambition of the UK hosting 50GW of offshore wind generation by 2040 the sector’s “biggest challenge yet”. It recommends that BEIS considers reforming the Contracts for Difference (CfD) auction mechanism as a means of helping the sector meet this challenge.

BEIS recently confirmed that CfD rounds will be held annually, where they were previously held once every two years. RenewableUK is recommending a further “evolution” of the scheme. Specifically, the manifesto recommends changes to how the CfD is allocated, meaning that the appropriate proportions of funding are allocated to the right sub-sectors. It also calls on the Government and the Crown Estate – which auctions plots of seabed to offshore project developers – to develop and publish forward plans for CfD rounds through to the end of the 2020s. This, it claims, would “maximise certainty for the sector”.

A statement from RenewableUK explains: “Although the CfD mechanism has successfully delivered new renewable capacity, the current market set-up may not be enough to deliver the volume of projects needed to fully decarbonise by 2035, as surging global demand for offshore wind is increasing competition for investment and putting pressure on supply chains.

“These global pressures, combined with maturing technology, means that the trend of ever-cheaper prices may be at an end. An ‘evolution’ of the CfD is needed to incentivise long-term capital investment in major projects, build up supply chains and continue to provide consumers with clean energy at low and stable prices.”

The manifesto also recommends that the Treasury works with BEIS to review whether the public R&D funding levels provided to the renewables space are appropriate. The Government has a target for total R&D investment to reach 2.4% of GDP by 2027, with a focus on scaling investments outside of London and the South East specifically. RenewableUK is expressing concerns that  sectors such as oil and gas, road transport and aerospace are currently receiving far more interest than low-carbon energy.

Enterprise zones

As the manifesto continues, measures are floated for speeding up the planning and development process for renewable energy developers – and for ensuring that the UK remains one of the world’s most attractive markets for clean electricity investment.

On the former, the manifesto argues the case for the streamlining of new offshore wind project planning and development, which it states is  “currently spread across a whole range of disparate bodies”. It recommends the creation of a centralised regulatory authority for consenting and licencing. It also recommends that, in submitting plans for projects, developers should outline how they plan to secure skilled workers to deliver and maintain them. The Government, meanwhile, should firm up its own strategic approach to closing the UK’s green skills gap.

On the latter, the manifesto states that the Government may wish to consider more “innovative” policies to make the UK more attractive for international investment – particularly investment in renewable energy supply chains. One option raised is the creation of new ‘enterprise zones’, where businesses can qualify for tax relief or tax credits. Such an approach is already being taken in the USA.

The Treasury announced eight freeport locations across the UK at the 2021 Budget. In these places, tax rates will be lower, planning processes will be simpler and more dedicated infrastructure funding will be provided. Enterprise zones would have similar benefits, but these benefits could be applied specifically to activities which further the UK’s energy transition.

RenewableUK’s chief executive Dan McGrail said that, if the measures listed in the manifesto are delivered in full, the UK could attract £200bn in private investment and deliver more than 120,000 jobs in wind energy alone by 2030.

“Renewables are playing a more important role in our energy system than ever before,” McGrail added. “The gas crisis and invasion of Ukraine have pushed up the cost of fossil fuels – and consumer bills – to record highs. We need to decarbonise at pace to build a home-grown clean power sector as the cornerstone of the Government’s Energy Security Strategy.”

UK Prime Minister Boris Johnson was notably absent from an event convening major economies to discuss the energy transition and plans for the COP27 climate conference hosted by the US last week. COP26 president Alok Sharma attended in Johnson’s place. Johnson stated that he had already tabled a meeting with Ukraine and needed to prepare for minor surgery on his nose. He has been keeping a low profile after a winning a no-confidence vote on 6 June, in which 40% of Tory MPs voted against him.

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