The next round of the U.K.’s contracts for difference (CFD) program will support up to 12 gigawatts of renewable power projects, the government has said.
An increase in the size of the next round was hinted at by Prime Minister Boris Johnson in October. Now it has been put in writing.
The CFD program sees bidders offer power at a set ‘strike price.’ If the wholesale power price dips below this, the government makes up the shortfall. If the wholesale price is higher, the extra revenue is paid back to the authorities. The contracts last 15 years.
The auction splits different technologies into different ring-fenced ‘pots’ based on how well established they are. The next tender’s structure has been confirmed with significant changes to which technologies will compete directly for funding.
In the 2019 auction, 5.8 GW of capacity, including 5.5 GW of offshore wind were awarded. Offshore wind will now compete on its own in Pot 3. Offshore wind prices went as low as £39.65 ($52.83) per megawatt-hour.
The U.K. is targeting 40 GW of offshore wind by 2030, up from around 10 GW today, as part of a ten-part plan to be net-zero by 2050.
Pot 1, for established technologies, welcomes onshore wind and solar back into the fold after they missed out on the previous two auctions. Both were excluded for political reasons as the Conservative Party sought to ease the local concerns of a subset of the electorate in rural parts of the U.K.
Since they last competed, solar and onshore wind projects have become competitive without subsidies, in the right conditions.
The developer of the largest solar project being planned in the U.K., at 300 MW, told GTM it had no intention of competing for a CFD.
Pot 2, for emerging technologies, now includes floating wind. The ongoing ScotWind tender, for seabed leases in Scottish waters, includes areas designated for floating wind.
If the industry is to have any reason for disappointment, it could be that calls for auctions to be held every year have been ignored.
Supply chain argument to rumble on
The government also announced that it would be launching a consultation on supply chain issues. This has been a prickly issue, especially with regard to offshore wind.
Political leaders in the U.K. and Scottish governments have both invoked the idea that the country’s offshore tracts offer the potential to become the “Saudi Arabia” of wind, with accompanying promises on jobs.
The U.K. offshore wind industry agreed to a “sector deal,” a sort of co-written mission statement for the sector, which would call for 60 percent of all capital expenses for offshore wind projects to be spent locally by 2030. However, as it stands, the U.K. supply chain can make that difficult to achieve.
In the past year, the selection of overseas shipyards for the construction of foundations has been especially contentious. Two projects, Neart na Gaoithe and Seagreen, developed by EDF and SSE respectively, have both awarded contracts for all their jackets, or wind turbine foundations, to overseas firms. EDF’s contractor Saipem had always said at least eight would be manufactured in Fife on Scotland’s East Coast, from where the finished project will be visible. All the steel jackets for both projects will now be made in China, UAE and Indonesia.