£290m of Contracts for Difference funding for renewables

Call for responses closes Tuesday 20 December 2016 (geothermal and fuelled technologies) or Tuesday 31 January (onshore wind)

The UK Government has announced that £290m will be available in the second Contracts for Difference (CfD) auction for offshore wind and less established technologies. This announcement follows the Government’s commitment in the March 2016 Budget to allocate £730m over the course of the current Parliament for further CfD rounds.

The application process for the Contracts for Difference allocation round will open in April 2017, and it is expected that a competitive auction will drive prices down further. The second Contracts for Difference auction will result in 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. It will also allow developers of innovative renewable technologies to deliver the best deal for bill payers. For example, the maximum price for offshore wind projects is now 25% lower than was set for the last auction, and a competitive auction could bring that price down further.

The Government has also today set out proposals for the next steps to phase out electricity generation from unabated coal-fired power stations within the next decade. This long-term plan will provide confidence to investors that the UK is open to investors in new, cleaner energy capacity as we transition from coal to gas, and build a diverse energy system giving us greater security of supply, which includes record investments in renewable technology and the reliable electricity that new nuclear power investment will provide.

The draft strike prices (£/MWh, 2012 prices) are as follows:

Technology

For projects deploying
in 2021/22

For projects deploying
in 2022/23

Offshore wind

105

100

Advanced Conversion Technology(with or without CHP)

125

115

Anaerobic Digestion (with or without CHP) (>5MW)

140

135

Dedicated Biomass with CHP

115

115

Wave

310

300

Tidal Stream

300

295

Final strike prices will be confirmed at least 10 days prior to the second round opening.

Fuelled and geothermal technologies
Geothermal is subject to a consultation in order to determine the way in which geothermal technologies will be treated under the CFD scheme.

Similarly, fuelled technologies (sewage gas, landfill gas, energy from waste, advanced conversion technologies (ACT), anaerobic digestion, dedicated biomass with CHP and conversions of coal fuelled generation to biomass fuelled generation) are also being reviewed.

It has been reported that ACT capacity currently within the planning stages would not meet the Government’s wider objectives as the only output would be in the form of electricity as opposed to high quality syngas. BEIS is therefore considering whether it is using the correct definition for ACT as well as whether the CfD scheme is the correct support mechanism for such technologies.

Included as part of the call for evidence is the success of RHI (available until 2020) and CfD (for projects that commission from 2021) in supporting the decarbonisation of heat.

The future of biomass conversion is being considered further.

The call for evidence on fuelled and geothermal technologies in the CfD scheme closes on 20 December 2016 with the strike price for geothermal being published after this date.

Non-mainland onshore wind projects

A previous consultation relating to additional support for island renewables (Orkney, Shetland and the Western Isles) under the CfD scheme suggested that these locations contained a unique set of characteristics which could justify a different level of support when compared to mainland projects as well as potentially being classified as a less established technology.

The Government is now seeking views as to whether such projects should continue to be treated as onshore wind (its current position) and therefore not classified as a separate technology or permitted access to CfD round two. Responses to the consultation are due by 31 January 2017.

To read more about this opportunity, click through here.

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