All of the contracts awarded as part of the most recent round of the Contracts for Difference (CfD) auction, have now been signed and returned to Low Carbon Contracts Company (LCCC).
The fourth Allocation Round (AR4) saw 93 individual projects across Britain win 99 contracts, with a total capacity of almost 11GW of clean energy supported.
These projects will now work with LCCC to meet their contractual milestones, ahead of coming online in 2023-24.
“Our renewable energy auction scheme has been an outstanding success, with the latest round securing enough clean energy to power twelve million British homes and the price of clean energy plummeting even further,” said Kwasi Kwarteng, UK business and energy secretary.
“Getting contracts signed means projects can push on and deliver jobs and opportunities across the country. This will help to secure our homegrown supply of cheaper renewables and bring down the price of energy for millions of British families as we shift away from expensive fossil fuels.”
AR4 saw the widest range of technologies ever in the CfD, with winning projects including tidal stream and floating offshore wind for the first time, as well as established solar, onshore and offshore wind technologies.
The size and scale of these projects is also diverse, with solar PV developments having an average capacity of 33.48MW for example, while Ørsted’s Hornsea 3 offshore wind farm megaproject has a capacity of 2,852MW.
The addition of AR4 projects is expected to:
- Increase overall CfD capacity by 60%
- Increase the number of CfD projects in the schemes portfolio by 145%
- Increase the number of CfD project stakeholders LCCC engages with by 80%
The estimated notional monetary budget impact of the AR4 projects is expected to be less than zero in the first three delivery years, with an increase in 2027-28 matching the steep rise in generation capacity coming online.
LCCC noted that money flows under the CfD are always subject to the actual prices of generation at the time, meaning the AR4 portfolio would return money to the CfD scheme under current market prices.
Existing projects developed with CfDs have been paying back due to these high power prices, with £300 million paid over six months over the last winter period, and £1 billion forecast to be paid back between April 2022 and March 2023.
Analysis from the Energy and Climate Intelligence Unit in July, suggested that the contracts awarded in AR4 would save £7 billion on electricity costs under the wholesale prices seen in the current crisis.
“We’re delighted to welcome these projects to the CfD portfolio and can’t wait to get to work, whether that’s with our established CfD partners or new stakeholders,” said George Pitt, chief financial officer at LCCC. “2022 has been a landmark year for the CfD scheme, and the diversity and scale of AR4 projects proceeding is a huge mark of confidence in it. Amidst unprecedented times, this new generation of power projects stands to benefit communities and businesses across the length and breadth of the country, as well as well as protecting the long-term health of our environment, economies and societies.”
Due to the number and diversity of contracts in AR4, LCCC automated the process used to produce, distribute and receive signed contracts, as opposed to the Emanual process used in previous allocation rounds where there were 16 contracts.
With allocation arounds set to occur annually from 2023, this process will save time and resources, the company noted.
AR4 projects must now pass the first contractual milestone on a CfD project’s journey to construction and operation, the Initial Conditions Precedent, within twenty working days.
