The record-breaking results of the government’s Contracts for Difference (CfD) sixth auction round (AR6) have been well received across the UK renewable energy industry.
Auction round six (AR6) was allotted the highest-ever budget for a funding round. Pot one, allocated to established technologies and awarded to solar PV and onshore wind projects, had a budget of over £185 million. Pot two’s budget saw £270 million available for emerging technologies and pot three had a total £1.1 billion available for offshore wind developments.
AR6 awarded a record 131 clean energy projects with a combined total capacity of 9.6GW. A combined total capacity of 6GW of offshore wind projects (excluding floating offshore wind) won contracts.
ScottishPower’s CEO, Keith Anderson, said the result shows “offshore wind is back on track” after auction round five (AR5), when no offshore wind capacity won CfDs.
He added: “This auction’s success shows this tried and tested investment mechanism, replicated globally, delivers exactly the scale of action needed, with billions of pounds to be pumped into the British economy replacing aging, polluting infrastructure.
“Now the Government and GB Energy should focus efforts on supporting new green technologies to unleash their potential, replicate offshore wind’s success and deliver on their ambition of making Britain a clean energy global superpower.”
The strike price for offshore wind developments that had won contracts in previous auction rounds was £54.23/MWh, and for new offshore wind contracts it was £58.87/MWh.
Ørsted’s Hornsea 3 offshore wind power plant re-bid and was awarded 1,080MW. Its Hornsea 4 project bid in for the first time, receiving a 2,400MW CfD. DESNZ called the developments, situated off the Yorkshire coast, “Europe’s largest and second largest” wind farms. Ørsted claims that Hornsea 3, with a 2,400MW capacity, is the largest globally.
Duncan Clark, senior vice president and head of UK & Ireland at Ørsted, said: “The important takeaway from this allocation round is that progress is being made, and it’s crucial that this momentum continues to grow. The government has shown it takes renewable energy seriously, and we’re confident it will continue working with the sector to increase the volume of projects deployed in the UK.
“Offshore wind is key to the nation’s energy security and remains one of the most attractive forms of energy generation, offering low-cost, highly scalable electricity to UK bill payers. Ørsted and the wider industry stands ready to deliver with a substantial pipeline of developments.”
Jess Ralston, head of energy Energy at the Energy and Climate Intelligence Unit (ECIU) also highlighted the consumer benefits of the successful auction round. She said: “This is good news for consumers, UK PLC and our energy security as these record levels mean cheaper power, jobs and growth as well as helping us transition off gas, which will increasingly come from abroad as North Sea output continues its inevitable decline.
“The fixed price, at or below the predicted wholesale price, will help to lessen the impact of any future gas price volatility with onshore wind and solar in particular effectively subsidising people’s energy bills.”
Octopus Energy’s generation arm has stakes in three British offshore wind farms, including the 1.2GW Hornsea One wind farm off the Yorkshire coast. It has previously promised to “unleash” $20 billion (£15.2 billion) into the sector by 2030.
Zoisa North-Bond, CEO of Octopus Energy Generation called the results “a big win and a clear comeback for Britain’s world-leading offshore wind industry”.
She continued: ““Offshore wind already generates 17% of the UK’s electricity and with Government targets to quadruple capacity, it will become the backbone of our energy future. It is set to deliver major knock-on benefits for the economy and unleash a new wave of green jobs and growth.
“The latest auction round with its hefty offshore wind allocation and the success of these projects agreed, is a loud and clear call for investors to keep backing Britain’s green energy revolution.”
Regarding green jobs, general secretary of UK cross-sector trade union Unite, Sharon Graham, said: “The government will continue to fall at the first hurdle in providing a just transition for oil and gas workers, unless we ensure that the towers, blades and nacelles needed for new wind farms are manufactured in the UK.”
If the government does not develop a UK wind manufacturing industry, Graham says, “it is simply exporting green jobs abroad”.
Solar’s record results
A total of 93 ground-based solar projects, with a combined capacity of 3.3GW, scored support from AR6. Solar PV achieved a strike price of £50.07/MWh, above the prices achieved in both AR4 (which was £45.99/MWh) and AR5 (which was £47.00/MWh, the maximum allowable price for the auction).
It is worth noting that, although its budget and awarded capacity were low, AR5 had a relatively positive outcome for solar which secured 56 projects with a total capacity of just over 1.9GW.
Director of policy and delivery for trade association Solar Energy UK Gemma Grimes said: “It is hugely encouraging to see an unprecedented volume of solar generation capacity contracted, enough to put a meaningful dent into future electricity prices. Similar levels of contracted capacity will be needed each year to meet our net zero ambitions,” she added.
“The CfD system is currently working well for solar. We look forward to future allocation rounds and will work with the Government to deliver the capacity necessary to meet its renewable energy targets. Having greater visibility of future budgets for the years to come would help achieve this.”
Steve Mack, chief investment officer at Low Carbon, which won six projects with a combined capacity of just over 180MW, expressed the company’s delight with the result.
He said: “Today’s news also builds on our success in the previous two auctions, which will play a play a crucial role supporting Labour’s 2030 clean power mission and tackling climate change.”
Speaking on what might improve the process for solar projects, Mack suggested extending the applicable delivery years for solar in future auctions to three years, enabling large-scale DCO solar projects with longer delivery timescales to bid.
“This will help de-risk the route to market for projects like our recently consented 500 MW Gate Burton Energy Park by supporting procurement and financing processes. We would also like to see DESNZ run CfD auctions twice a year to allow a higher volume of projects through the system meaning they can be built more quickly.”
AR6 awarded the first solar development with a capacity over 50MW to secure a CfD, EDF’s Longfield Solar Farm. The project, with 400MW generational capacity, won a 299MW contract.
Tidal stream slows
In the previous auction round, tidal energy was awarded 53MW worth in contracts, which is far above this year’s result of 28MW, split across six projects. The Ynni’r Lleuad 2 scheme, developed by Inyanga Marine Energy Group in Morlais, Wales, was awarded the largest contract, at 10MW.
Inyanga CEO Richard Parkinson said: “This allows us to build on economies of scale from our portfolio of projects to achieve commercially viable generation projects. This award is a testament to the hard work of our pioneering team and our relentless drive to make HydroWing competitive.”
The first stage of Ynni’r Lleuad also won a contract last year, again the largest tidal stream project to be successful.
Generally, while this success is encouraging, there are calls for the government to do more moving forward.
Mark Sommerfeld, deputy director of policy at the Association for Renewable Energy and Clean Technology (REA), said: “Along with celebrating these results, we also highlight the importance of looking to future CfD allocation rounds. With delivery dates for projects in this auction already going out to 2029, it is a reminder of the limited time available to contract the generation needed to meet the Government’s 2030 Clean Power Mission.
“Additionally, not all the technologies required for net zero have fully benefited from the CfD framework. For instance, geothermal power still lacks robust support, and there is also an opportunity to extend the life of existing low-carbon generation assets nearing the end of their current contracts through the CfD, preventing the premature loss of critical renewable generation.”
