Neart na Gaoithe has initiated a CFD dispute, according to the Low Carbon Contracts Company, which terminated the wind farm’s Contract for Difference on 29 March
From the February 2015 issue of New Power:
New uncertainty has been created around the allocation process for Contracts for Difference (CfDs) as four offshore wind farms thought likely to enter the auction round have to do so under threat of judicial review of their development consent orders.
RSPB Scotland said it would ask for judicial review of the Inch Cape, Neart na Gaoithe and Seagreen Alpha and Bravo projects in the Firth of Forth and Firth of Tay, which were granted consent by the Scottish Government at the end of last year. The projects together have a capacity totalling 2.2GW.
The Department of Energy and Climate Change (Decc) said that the projects can bid in the auction, as long as they have development consent when it takes place. Scottish energy minister Fergus Ewing told ReNews: “These were robust decisions and I am confident the process will be vindicated”. Projects that fail to sign CfDs if awarded, or to meet delivery milestones, are excluded from bidding in future rounds for 13 months.
The challenge will add to the uncertainty for companies seeing to gain financial support, as in practice, the CfD auction is expected to provide support for just one offshore wind farm.
The auction, which takes the form of sealed bids, is now due to open on Friday and applicants will hear whether they are successful on 26 February (see box, left). Decc has increased the total pot available for less developed technologies by £25 million in 2017/18. The total pot for developed technologies is £50 million for projects commissioning from 2015/16 and £15 million more for those commissioning from 2016/17. For less-developed technologies it is now £155 million from 2016/17 plus £105 million for projects comissioning from 2017/18.
Charges to appeal
The CfD auction was delayed this year because companies appealed decisions on whether they were eligiible to take part.
But in future companies who fail to qualify to participate in auctions could face charges if they want to appeal the decision, energy minister Matthew Hancock told members of the Select Committee on Energy and Climate Change. He said, “It is worth asking the question of whether we get the incentives around appeals right, because you would not want a situation where the appeal is the no-cost option and therefore becomes an automatic option, because that undermines the decision-making process. … that has to be part of what we think about over the summer.” He said changes would not “necessarily need to be more administratively burdensome“ but warned that “ If an appeal is risk-free, you would expect it to become the norm as opposed to people thinking about whether they have a good chance.“
Mark Ripley, EMR project director at National Grid, told MPs said, “I think it was probably single figures that went to Ofgem [to appeal], and all of those appeals were in fact rejected.”
The minister insisted that the delay to the CfD auction was “within the bounds of the expected timings. … I do not think the difference between a December settlement and a March settlement is enormous in the grand scheme of things.”
Hancock did not deny suggestions from MPs that that the cost and complexity of CfDs had disadvantaged smaller parties. Instead,he suggested larger parties offered greater surety. “If we are signing up the bill payers to a very long-term contract to provide energy, we have to be sure … the businesses on the other side are going to be able to deliver on their piece. That does mean that we have to do some serious due diligence. It means that, in order to make that practicable, we have to have size limits.”
John Robertson MP put the cost of entering the CfD auction at £200,000, and said “the risk to SMEs in comparison to large companies is disproportionate”, but Hancock said, “These are multi-million pound, and sometimes billion-pound, contracts…. This is designed for the big stuff and that is expensive”. Referring to Feed-In Tariffs, he said “we have a simpler, much-cheaper-to-apply-for subsidy system for the little stuff”. Robertson pressed Hancock on whether the department was listening enough to smaller players, citing earlier evidence from both the Solar Trades Association and the Renewable Energy Association, but Hancock insisted Decc had taken their concerns on board.