Government Announces Outcome of First CfD Auction

The UK government has announced that it will hand out £315 million to 27 renewable energy projects as a result of its first competitive auction for “Contracts for Difference” (CfD). The contract awards could result in more than 2GW of new capacity, with the Government further stating that funding for CfDs could rise to over £1 billion per year by 2020/21.

Background

The majority of the 2GW of new capacity to be funded through the first auction round was awarded to two offshore wind projects totalling 1.1GW in capacity. In addition, 15 onshore wind projects and 5 solar projects will receive funding contracts. According to the Government, the auction process means that the investment will cost the consumer £110 million less than it would have without competition.

Each renewable technology was awarded a guide “strike price”, which set the maximum support available. However, all but one of the auctioned technologies cleared at substantially less:

  • Solar: £50/MWh – 58 per cent lower than the Government’s maximum price of £120/MWh.
  • Offshore wind: £114.39/MWh – 18 per cent lower than the Government’s maximum price of £140/MWh.
  • Onshore wind: £79.23/MWh – 17 per cent lower than the Government’s maximum price of £95/MWh.
  • Waste: secured a strike price of £80/MWh, the maximum allowed by Government.

The decision to award contracts to just five solar projects, totalling less than 72 MW, has been described as “disappointing” by Paul Barwell, CEO of Solar Trade Association (STA), adding that “the soon to be cheapest and most popular renewable – solar power – has lost out in a complex auction scheme that favours big players and genuinely established technologies”.

However, RenewableUK, which represents wind energy developers, welcomed today’s announcement, saying it highlighted the work that had been achieved by the industry to bring down costs in both offshore and onshore wind. The latter’s future has looked increasingly uncertain under the CfD, especially since the Conservatives declared they would bring in a moratorium for onshore wind if they win the election in May. “The highly competitive prices achieved during this auction, highlight the fact that the industry has been working hard to bring costs down…the offshore industry, provided the conditions are maintained, is well on the path to achieving its stated aim of £100/MWh by 2020” said Maria McCaffery, CEO of RenewableUK.

Related Links

  • For a breakdown of the outcome by technology, year and clearing price, the % saving on Admin Strike Price for each technology, and the geographical spread and number of homes powered by each project, please click here.
  • Full list of the successful projects, please click here.

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