Posted on: 27/11/2018
Concerns have been voiced over the £60 million budget announced by the UK Government for the upcoming third Contracts for Difference (CfD) auction being staged next Spring.
The funding will support “less-established” technologies for the delivery years 2023-24 and 2024-25.
The Department for Business, Energy & Industrial Strategy (BEIS) plans to impose a capacity cap of 6GW. An offshore wind administrative strike price has been set at £53-56/MWh, while the new remote island onshore wind technologies will have a strike price of £82/MWh.
The previous auctions set a record-low strike price of £57.50/MWh, with the cost of offshore wind power halving over the past two years.
BEIS said the falling costs means it should be able to secure more generation than the last auction at a lower cost for consumers.
A final budget notice will be issued in the run up to the allocation round opening in May 2019.
Sector deal ‘close’
Energy Minister Claire Perry also announced that a sector deal for the offshore wind industry will be concluded by Christmas.
Benj Sykes, Co-Chair of the Offshore Wind Industry Council, welcomed the news and the announcement of the CfD budget.
“Industry and Government are close to agreement on a sector deal that will set the pathway to 30GW and we need to look at the details of how the next auction contributes to that goal.”
Although Energy and Climate Intelligence Unit analyst Jonathan Marshall said the relatively low level of funding reflected cost reductions across the offshore wind industry, he also added:
“We can expect this auction to be highly competitive, with only the most attractive projects bagging contracts.
“However, limiting funds will likely dissuade some developers who may find that their projects will take longer to come to market than they originally envisaged,” he added.
Green campaigners questioned how the remaining money from the £557m CfD budget will be allocated.
Kate Blagojevic, environmental charity Greenpeace UK’s Head of Energy, said: “This is a genuinely bewildering move by the government that misses the opportunity to drive down offshore wind costs as fast as possible.
“They promised over half a billion pounds in investment, that was widely expected to be divvied up and made available in sizeable chunks over the next few years.
“But this first chunk is a pitiful sum that could end up limiting UK export potential and jeopardising our climate goals.”