The UK’s Department for Business, Energy and Industrial Strategy (BEIS) has announced the results of the fourth contracts for difference (CfD) round, with a record 11 gigawatts of consented capacity set to secure backing.
Overall, 93 projects with existing planning permission across England, Scotland and Wales have won contracts through the auction process, which is more than in all 3 previous rounds combined.
In a statement BEIS said allocation round four (AR4) of the scheme had been “the most successful ever” securing 10.8GW of capacity from a range of technologies, including offshore wind, solar, onshore wind.
For the first time ever, it will also see CfD support awarded to floating offshore wind and tidal stream projects, with 32MW and 41MW of capacity secured, respectively.
Almost 7GW of new offshore wind projects will be supported – enough to increase the country’s overall capacity built and under construction by 35% and “a significant step” towards the country’s ambition to reach 50GW of offshore wind by 2030.
Prices have also continued to fall since previous rounds. The per-unit (MWh) price of offshore wind secured in this round is almost 70% less than that secured in the first allocation round, in 2015.
Onshore wind and solar energy were both included in a CfD auction for the first time since 2015. Onshore wind secured almost 0.9GW of new capacity, clearing at a per unit price that was more than 45% lower than in the first CfD round in 2015, while solar secured more than 2.2GW.
The fourth round also saw developing technologies tidal stream and floating offshore wind projects successful for the first time.
Business and Energy Secretary Kwasi Kwarteng said: “Eye-watering gas prices are hitting consumers across Europe. The more cheap, clean power we generate within our own borders, the better protected we will be from volatile gas prices that are pushing up bills.”
“Thanks to today’s record renewable energy auction, we have secured almost 11GW of clean, home-grown electricity – which would provide as much power as around 6 gas-fired power stations.
“These energy projects already have planning permission, now they have a funding contract in place. We’re going to these projects built as soon as possible to better protect millions of British families from rising costs.”
Meanwhile, Energy Minister Greg Hands called the auction “a roaring success.”
“Not only has it secured a record capacity of clean electricity, it ensures the UK will have a future powered by a resilient and diverse supply of homegrown energy by bringing forward a greater range of renewable technologies than ever before.
“The government’s British Energy Security Strategy set out how Great Britain will accelerate the deployment of renewable technologies, with an ambition to see 95% of electricity being low carbon by 2030. The strategy also set out an increased ambition for the number of clean jobs in the UK by supporting 90,000 in offshore wind by 2030.”
‘Remarkable’ results
The price and capacity secured in the auction was hailed by industry observers, particularly in the offshore wind sector, where commodity prices and supply chain issues had been expected to push up prices.
👀
Remarkable prices. And especially since commodity prices will be so uncertain over this period.Green power is cheap power. https://t.co/GWSnXgGCDp
— Chris Stark (@ChiefExecCCC) July 7, 2022
RenewableUK said the projects would save consumers an estimated £58 a year compared to the cost of power from gas.
The trade body’s deputy chief executive Melanie Onn said: “Today’s record-breaking auction results show that there is a way to replace unaffordable gas with low-cost clean power generated by a wide range of renewable technologies led by wind, both offshore and onshore. Thanks to the rapid construction times of new onshore wind and solar sites, billpayers will start to feel the benefits of today’s auction next year.
“Working closely with government, we need to make this country the most attractive place to invest in. This is particularly important if we want to develop our supply chain in new technologies like floating wind, tidal stream and green hydrogen, in which we can lead the global market and seize the export opportunities this offers.”
Staggering volumes here. Enough to cover electricity use by over half of UK homes, or all the electrification of transport this decade. From a single auction.
(Ofgem assume 2.9MWh per typical 🏠)
(CCC expect ⚡️increase for 🚗🚐🚛from 9 TWh in 2022 to 47TWh to 2030) https://t.co/ACoAKY8Tlj— Mike Thompson (@Mike_Thommo) July 7, 2022
‘Unusual outcomes’
However, Scottish Renewables pressed that the future of the CfD “must be focused on imperatives other than just cost reduction.”
Chief executive Claire Mack noted that while the scheme had been “incredibly successful” in driving down electricity prices, more work was needed to ensure capacity was deliverable.
“It is clear that we have seen some unusual outcomes in terms of price which demonstrate that there is a need to look at how the costs generators are facing to get clean electricity to consumers are influencing the picture.”
“Cost reduction may seem positive but the pressures of inflation, commodity prices and other external pressures mean costs are increasing across the energy industry. Renewable power, and particularly offshore wind power, faces other imperatives, too.
In offshore wind particular, she said developers must have “more financial leeway” to invest locally, and that the selection process should focus on wider economic benefits than the cost of electricity alone.
She also said the capacity caps for each technology should be removed in upcoming rounds.
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