Sealed bidding for support for large-scale solar farms in the UK will begin tomorrow, 29 January, with the government confirming it had made additional budget available for offshore wind and other “less established technologies”.
The Contracts for Difference (CFDs) scheme is split into two categories for mature and less mature renewable energy technologies with solar PV forced to compete with onshore wind for a share of the pot.
The day before bidding was set to begin, the UK’s Department of Energy and Climate Change (DECC) said it had added an extra £25 million (US$38 million) funding for less established technologies, which also includes wave, tidal stream and anaerobic digestion.
The government claims that the move is in response to higher than anticipated demand for the CfD scheme. The available funding pot for less established technologies now stands at £260 million (US$395 million).
The EU is encouraging its members to pursue competitive funding for renewable energy; when granting state aid approval to the CfD scheme it called it a “fine example of how to promote the decarbonisation of the economy with market-based support mechanisms”.
The scheme has attracted interest from beyond Europe with Japan reportedly keen to follow the UK’s example.
Bidders offer a price per unit of electricity for their projects. If the market price is below that rate during the contract’s 15-year term it is topped up. If the market rate is above that level, the beneficiary hands back the difference, essentially guaranteeing set revenue for the duration.
Commenting on the funding boost, UK energy and climate change secretary Ed Davey said: “We are transforming the UK’s energy sector, dealing with a legacy of underinvestment to build a new generation of clean, secure power supplies that reduce our reliance on volatile foreign markets.
“The high demand for contracts shows that we’re one of the top places for renewables investment, and the best place in the world for investing in offshore wind.
“Renewable electricity generation and investment have both more than doubled since 2010. We attracted a record breaking £10 billion (US$15 billion) worth of investment in 2014 and by making projects compete for support, we’re ensuring consumers get the best possible deal as well as a secure and clean power sector.”
The government says that the increased funding will still keep the scheme inside the levy control framework budget, which caps how much support renewable and energy efficiency programmes receive annually. Looking forward, the government has reiterated that it will not publish the budget for next year’s auction until the autumn, but has stood by its plans to add £50 million (US$76 million) more funding for established technologies.
The move follows a previous £95 million (US$144 million) boost to the CfD budget in October 2015, with established technologies getting an extra £15 million (US$23 million) and less established receiving an £80 million boost (US$121 million).
The government has been criticised for allocating around half the budget for the CfDs outside the main auction process with five offshore wind farms the chief beneficiaries. Support for solar over 5MW under the renewable obligation certificates (ROCs) scheme closes at the end of March, earlier than planned, leaving the CfD as the only subsidy option. Some of the energy firms behind offshore wind projects in the UK backed the governments early removal of RO support.
Additional reporting by John Parnell