A potential 8 gigawatts (GW) of onshore wind and solar is eligible to bid in the upcoming Contracts for Difference (CfD) round.
The latest figures from Cornwall Insight’s ‘renewables pipeline tracker’ show that the pipeline of projects for both forms of green energy generation continue to grow.
The market researcher calculates a CfD allocation round four eligible solar pipeline of around 3 GW, up 1.8 GW on the same time a year ago.
For onshore wind, Cornwall Insight forecast CfD eligible capacity of about 5 GW, an increase of 1 GW on this point in 2020.
Further analysis also shows at least a further 6 GW of solar PV capacity is in the grid connection queue and not yet in planning.
The fourth round of the CfD scheme – which allows renewable developers to secure a fixed price for the energy they produce – is due to open in December.
It is the UK Government’s main subsidy mechanism for supporting low-carbon electricity generation.
James Brabben, head of assets and infrastructure at Cornwall Insight, said: “With around four months to go until eligibility deadlines, the pipeline could increase further, especially from solar PV with its typically quicker lead times for planning approval.
“By December, we could therefore have a record level of new-build renewables looking to bid into the CfD round, creating some interesting decisions for new-build plants.
“Depending on budget and MW cap parameters in the auction, some projects may deem it unlikely they will be competitive in the CfD. As a result, they may look to alternative routes to market options such as utility Power Purchase Agreements (PPAs) or Corporate PPAs (CPPAs).
“Some generators may also look to find an edge by incorporating other revenues, including those available through balancing services markets or different business models such as co-location with batteries.
“Although there are alternative options available to new build generators, these are still challenging, and the bankability of the CfD contract is likely to incentivise solar and onshore wind generators to bid into the AR4 process. The lack of costs or bid bonds in AR4 participation would also support this view, with generators potentially seeing the auction as a “free hit” to enter and find out if prices materialise at a level suitable for their project returns.
“We, therefore, expect very high levels of auction competition and a potential stalling in the development of other routes to market options such as utility PPAs and CPPAs if generators crowd the CfD and only look at alternatives post-auction in spring/summer 2022.”
Recommended for you
