The UK government has welcomed solar back into its renewables auction fold after a six year absence. Image: Getty.
The UK government has confirmed solar’s ability to participate in the country’s next renewables auction, which is expected to contract for up to 12GW of new capacity.
The UK’s Department for Business, Energy and Industrial Strategy (BEIS) confirmed today that, following a consultation on the subject launched in March, utility-scale solar projects – deemed to be those with capacities in excess of 5MW – would be able to compete in the fourth allocation round (AR4) of its Contracts for Difference (CfD) scheme, with the auction set to take place late next year.
Solar will continue to compete as a so-called ‘Pot One’ technology, an auction pot which includes more established renewables generation classes, which will see the asset class compete against onshore wind for contract support.
Two further pots have been maintained for the AR4, with offshore wind given its own pot and a further pot allowing less established renewables to compete for contracts away from more proven technologies.
BEIS anticipates that the next auction round will contract for up to 12GW of new renewables capacity, more than double the previous round – which was conducted in September last year – which contracted for 5.8GW of capacity, mainly offshore wind.
Specific budget allocations and capacity caps for each pot are to be determined close to the opening of the round, BEIS said.
Commenting on the news, UK energy minister Kwasi Kwarteng said that the CfD scheme had allowed for renewables to generate more than a third of the UK’s power, describing it as a “huge achievement” for the country.
“The new plans set out today build on the Prime Minister’s Ten Point Plan and put us firmly on the path towards building a new, green industrial revolution,” he said.
Reintroducing solar into the scheme ends a six-year hiatus for the technology’s participation, having last been allowed to compete for capacity contracts in the first CfD allocation round in 2015. Since then, the government has opted to prevent established ‘Pot One’ technologies from competing, electing only to support less-established technologies.
The CfD scheme works by having developers submit generation projects with a strike price, determined to be the lowest possible price the project can generate power on a £/MWh basis. Projects are selected based on this price and handed 15-year contracts, guaranteeing them a set revenue stream. These strike prices are allowed to increase each year based on inflation.
Should the country’s wholesale energy price dip below that strike price, the government pays the difference by means of a top-up payment.
To date, the UK CfD scheme has supported nearly 50 renewable energy projects, totalling some 15.5GW of total capacity.
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Jan 20, 2021 GMT
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