Power developers in clean tidal, solar, and wind technologies jumped at the starting gun today, competing for a slice of the government’s record £285 million support in the nation’s biggest ever Contracts for Difference auctions.
With up to 12 GW of renewables capacity to be awarded, the long-awaited Allocation Round 4 is bigger than the combination of its three predecessors. Would-be generators have until January 14 to submit bids. D-BEIS will announce the outcomes next spring.
Targeting expanded capability estimated by D-BEIS to meet the demand of 8 million homes, the AR4 reverse auctions embraces the widest technology spread since AR1 in 2015 kicked off the biannual round of pledges.
For the first time, solar PV and – where permitted – new onshore wind today join generation means already eligible, battling for 15 year contracts awarded by with the government’s Low Carbon Contracts Company.
D-BEIS divides the full AR4 pot of contested subsidies as follows:
|Clean generation method||Subsidy competed for, £ million|
|Offshore fixed wind||200|
|Floating wind, remote island onshore wind||55|
CfDs’ justification, proven over six years of experience, is to secure low prices for consumers, while protecting developers of emerging clean technologies from volatile wholesale power markets. As proof of CfD’s success, ministers point to offshore wind, where unit MW costs of generation have dropped by 65% between 2015 and 2019.
The auctions are so structured that bidders’ money may flow back to the government. That will happen if wholesale prices rise at any point above the price ‘struck’ i.e. – agreed – in the relevant contract. In such cases generators must pay the difference back to the government entity. Onshore wind projects and solar look likeliest to undercut wholesale prices.
Energy secretary-of-state Kwasi Kwarteng said: “Our biggest ever renewables auction opening today will solidify the UK’s role as a world-leader in renewable electricity, while backing new, future-proof industries across the country to create new jobs.”
“By generating more renewable energy in the UK, we can ensure greater energy independence by moving away from volatile global fossil fuel prices, all while driving down the cost of new energy.”
Green power groups hailed the CfDs’ fourth allocation round. RenewableUK CEO Dan McGrail welcomed “a landmark auction securing the largest amount of new renewable energy capacity so far”.
He predicted AR4 would benefit from commercial investment of over £20bn, part of an “enormous appetite” among companies and private investors to deliver UK clean power projects.
“More than 16GW of wind could be ready to compete, and over 23GW of renewables overall,” McGrail added.
“It’s great to see the development of innovative floating wind and tidal stream projects supported by ring-fenced funding, as RenewablesUK has been advocating,” McGrail went on. “This will enable us to ramp up the roll-out of these cutting-edge technologies, building up massive industrial opportunities for the future, including exports.”