Posted on: 15/09/2017
The CfD auction results announced this week will deliver significant value for the GB market. Iain Robertson, Vice President Renewables, discusses the impacts on the future energy mix.
The second Contacts for Difference (CfD) auction has awarded contracts to 11 projects totalling 3.3GW for the delivery years 2021/22 and 2022/23, with the significantly reduced strike prices proving the economic value of renewables in the energy mix.
Offshore wind, biomass CHP and advanced conversion technologies are all represented, with projects spread across England, Scotland and Wales.
One of the most remarkable outcomes is the strike price for the two offshore wind projects commissioning their first phases in delivery year 2022/23, which is almost half of the price paid for offshore projects in the 2015 auction.
At £57.50/MWh for 15 years, these projects are looking incredibly cost-effective and a stark contrast to the nuclear strike price for Hinkley C, of £92.50/MWh for 35 years.
These offshore projects are also cheaper than the levelised cost of electricity for gas generation published by the Department for Business, Energy and Industrial Strategy (BEIS).
This auction is another important milestone in the transition towards an increasingly renewable energy mix, which appears to be achieving its objective of delivering affordable renewable energy.
Re-introducing solar and onshore wind to the auctions could help drive prices down even further for the established technologies (as we have seen in recent European auctions), potentially to levels below the long-term wholesale power price, which would represent a net gain to end consumers.
Recent research by Scottish Renewables highlighted that 1GW of new onshore wind capacity could be delivered for £49.40/MWh, if projects were able to secure long-term support through a CfD-type mechanism.
While the response to the auction results has been overwhelmingly positive and we certainly agree it has been a great boost for the sector, we would have liked to see some emerging technologies secure support.
The UK currently enjoys a world-leading position in marine renewables, but that sector will continue to require support in the short to medium-term in order to fully establish itself, as other countries compete with the UK for investment.
Perhaps the £114m left over from this auction’s budget could be used to boost emerging technologies?
We would be keen to see solar and onshore wind, including island wind, allowed to compete in future CfD auctions, to create more competition, further drive down costs and allow a broader range of projects into the GB energy mix.