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Next Contracts for Difference auction confirmed by May 2019 as solar remains locked out

Image: Ørsted.

Offshore wind and remote island onshore projects will compete in May 2019, with auctions to take place every two years. Image: Ørsted.

The government has confirmed plans to hold new Contracts for Difference (CfD) auctions for offshore and remote island wind projects, with the first to be held in May 2019.

But with no word on auction rounds or alternatives for established renewables, it looks as if utility-scale solar remains locked out of the process despite a growing chorus of recommendations to the otherwise.

The auction was announced by energy and clean growth minister Claire Perry yesterday during a visit to the Offshore Renewable Energy Catapult in Newcastle, with the parameters of the auction to be set later this year.

A second allocation round will be held in 2021, with auctions to be carried out every two years thereafter, which Perry said would offer “clarity over years, not months” to industry to support “meaningful long-term investments”.

“For the last decade the offshore wind industry has been a great British success story: increasing productivity, raising earnings and improving lives in communities across the UK. Today, the sector gets the certainty it needs to build on this success through the next decade,” she said.

Depending on the price achieved, she added that these auctions would deliver between 1-2GWs of offshore wind each year in the 2020s, utilising £557 million of funding previously committed to CfDs.

Despite operating over 7GWs of operational offshore wind, the technology remains included in the auction for ‘less-established’ technologies. However, continued cost reductions in the technology have led to record low strike prices being agreed, with two offshore wind schemes winning contracts last year at £57.50 per megawatt hour (MWh).

Onshore wind had previously been locked out of such auctions however the government consulted in December on allowing such projects back into the subsidy scheme on remote islands to compete against what it dubbed ‘other less-established technologies’.

“These projects have characteristics that set them apart from projects elsewhere in the UK to the extent that the government believes they should be considered as a separate technology,” the Department of Business, Energy and Industrial Strategy (BEIS) has said.

BEIS argues that remote island onshore wind projects are more difficult to build owing to “significantly higher transmission costs” and higher load factors.

Despite plummeting technology and deployment costs in its own right, solar has remained locked out of CfDs since 2015, with the closure of the Renewables Obligation in March 2017 removing all subsidy for large scale deployment

This is against the advance of the Committee on Climate Change, which advises the government on how to reach is carbon reduction targets. In January, it stated that solar and other established renewables needed a route to market and repeated this call in its most recent publication last month.

Committee chair Lord Deben has also called on the government to make it known to the public the cost of its decision to leave the cheapest forms of generation out of CfDs.

The National Infrastructure Commission, which outlines the infrastructure priorities of the UK for government, has also said all low carbon technologies should be able to access the same markets and compete on an equal basis for contracts.

Similarly, Energy UK has called for ‘revenue stabilisation’ CfD auctions to be put in place as part of the Electricity Market Reform’s (EMR) five-year review, while the regulator Ofgem has also it would still be “beneficial” for a CfD-esque scheme to cover so-called ‘pot one’ technologies.

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