The fifth allocation round (AR5) of the Contracts for Difference (CfD) scheme has opened for applications.
Earlier this month, the Government confirmed a £205 million budget for the round – the first to be held since they became annual. This is designed to aid the deployment of low carbon electricity in Britain, doubling the subsidy available.
The fifth CfD funding round includes £170 million for established technologies (Pot 1), and a ring-fenced budget of £10 million available for tidal stream projects (Pot 2).
The technology groups (‘pots’) are as follows:
- Pot 1: Energy from Waste with CHP, Hydro (>5MW and 5MW), Remote Island Wind (>5MW), Sewage Gas, and Solar Photovoltaic (PV) (>5MW).
- Pot 2: ACT, AD (>5MW), Dedicated Biomass with CHP, Floating Offshore Wind, Geothermal, Tidal Stream, Wave.
However, when the funding for AR5 was announced on 16 March it was met with criticism by a number of bodies, including RenewableUK. The trade association warned that it was “sending the wrong investment signals” to renewable energy investors.
“Unfortunately, in the light of global inflationary pressures, the budget and parameters set for this year’s CfD auction are currently too low and too tight to unlock all the potential investment in wind, solar and tidal stream projects which the industry could deliver,” said RenewableUK’s economics and markets manager Michael Chesser.
“Concerns about energy bills and energy security are at a record high, so the UK should be trying to maximise investment in low-cost clean energy, to provide relief for billpayers who’ve been hit hard by massive spikes in global gas prices over the past year.”
Similar concerns were raised by Cornwall Insight, which stated that the rising cost of capital threatens to derail the expansion of renewable energy projects such as onshore wind and solar PV.
The consultancy suggested that rising costs of capital – driven by inflation, interest rates, supply chain problems and labour shortages – meant developers are becoming increasingly concerned about bidding for projects in the next CfD auction with fears they may not get a return on any investments they make.
Since the introduction of the CfDs, the renewable energy sector has grown significantly, with offshore wind, in particular benefiting from the scheme. Over the first four auctions, a combined capacity of almost 27GW has been awarded support.
The most recent round (AR4) – the largest CfD auction to date and the first in which solar and onshore wind could participate since 2015 – secured almost 11GW of low-carbon capacity.
AR5’s application window will close on 24 April 2023.