Plans to hold fourth Contracts for Difference auction for range of different renewables technologies confirmed by government for late 2021
The government has said it aims to procure up to 12GW of new clean power capacity from a raft of renewable energy technologies in next year’s Contract for Difference (CfD) auction, as it today set out further details for the next round of the UK’s flagship low carbon energy subsidy scheme.
Scheduled to open in late 2021, the fourth CfD auction round aims to secure double the 5.8GW renewable electricity capacity procured in the previous round in 2019, with the government predicting projects supported by the clean power contracts could secure enough capacity to power 20 million electric cars on the UK’s roads each year.
The Department for Business, Energy, and Industrial Strategy (BEIS) also confirmed the floating offshore wind projects would be able to compete for contracts through the CfD scheme for the first time next year, while solar and onshore wind farms will also be able to bid for support for the first time since 2015, as the government seeks to ramp up its renewables capacity to meet climate targets.
The CfD round will be divided into three ‘pots’ for renewables technologies: pot one for established technologies such as onshore wind and solar PV; pot two for less established technologies such as floating offshore wind, advanced conversion technologies, and tidal stream power; and pot three for offshore wind.
CfD auctions, which offer 15-year contracts that guarantee clean power generators a set price for the power they supply, are credited with playing a key role in driving the rapid decline in development costs for renewable electricity over the past decade. The last auction round for clean power contracts in 2019 delivered record-low prices on enough energy to power over seven million homes.
Renewable energy advocates have predicted that onshore wind and solar, and potentially even new offshore wind projects in the future, could bid for contracts at prices that are below current wholesale prices, raising the prospect of reduced energy bills for households and businesses.
The confirmation of the details for the next CfD round comes hot on the heels of the government’s 10 Point Plan for a Green Industrial Revolution, which was unveiled last week and set a target for the UK to deliver 40GW of offshore wind capacity by 2030, with an ambition for every home to be powered by offshore turbines.
Energy Minister Kwasi Kwarteng said the CfD plans for 2021 would build on the Prime Minister’s 10 Point Plan “and put us firmly on the path towards building a new, green industrial revolution”.
“The UK is a world leader in clean energy, with over a third of our electricity now coming from renewables,” he said. “That huge achievement is thanks to the government’s Contracts for Difference scheme.”
Following the conclusion of the third CfD Allocation Round in September 2019, the scheme currently supports 49 renewable electricity projects across a range of technologies, totalling around 15.5GW of capacity.
Emma Pinchbeck, chief executive of trade body Energy UK, welcomed the government’s target to double the capacity from bids in next year’s CfD auction, as well as to allow bids from key technologies such as onshore wind and solar.
“Past auctions have been extremely successful, with renewables now an extremely cheap and mainstream form of power,” she said. “The return of solar and onshore wind, and the inclusion of new and necessary technologies like floating wind and storage is good news for bill payers and for British industry alike.”
In addition, the government also today announced plans for a consultation on proposals to support more jobs and investment in the UK’s renewable power supply chain, in order to increase the competitiveness of domestic manufacturers and reap the economic rewards from the government’s “Green Industrial Revolution” vision.
The consultation will include proposals to “increase the clarity, ambition and measurability” of supply chain commitments made by renewable project developers when they bid for contracts in the CfD scheme, and to introduce new measures if they subsequently fail to deliver on those commitments, the government said.
It follows reports this weekend that more than half of the estimated £50bn investment in building offshore wind farms in UK waters over the coming decade is expected to go to equipment manufacturers and factories based oversees. The government’s own figures predict that only around £20bn of projected investment will go towards supporting British jobs and industry, prompting calls for stipulations in state investment support packages that firms must base their turbine manufacturing plants in the UK.
RenewableUK chief executive Hugh McNeal also welcomed today’s CfD announcement, which he said would unlock over £20bn of new investment in the economy and further strengthen efforts to bolster the UK supply chain.
“The new structure for clean power auctions, with a dedicated pot for offshore wind, can deliver the scale needed for our 40GW by 2030 target as well as providing support for innovative marine and floating wind technologies,” he said. “The industry is investing to develop a vibrant, competitive UK supply chain. We look forward to working with government on the details of how reforms to Supply Chain Plans can support this.”