The government has added an extra £25 million to the pot ahead of the first round of auctions for low carbon generation contracts.
The auctions, which begin on Friday (29 January), are designed to incentivise low carbon power generation technologies such as wind, solar and biomass. Generators bid from a limited pots to receive 15 year contracts, which guarantee them a price for power. The aim is to ensure that low carbon technologies can compete with cheaper, fossil-based generation. Offering the subsidies in an auction-based format is designed to drive down costs to consumers, given that all levies and subsidies are added to their bills. Those levies are capped under the Levy Control Framework.
Auctions are to be held once a year, with the extra £25 million announced today taking the initial total pot to £325 million.
The auction process has been criticised by some renewables groups for favouring larger companies. However, Decc has insisted that all stakeholders have been engaged and that the process will be reviewed this summer ahead of next year’s auctions.
The department has stated that it is not planning to increase the frequency of auctions, as this may impact liquidity.
Budgets for next year’s auction will be confirmed in Autumn.
Announcing the extra funding today, Energy and Climate Change secretary Ed Davey said:
“The high demand for contracts shows that we’re one of the top places for renewables investment, and the best place in the world for investing in offshore wind.”