Industry welcomes BEIS promise of annual CfD auctions

From March 2023, allocation rounds for Contracts for Difference (CfDs) for new renewable generation will be every year, instead of every two years, BEIS has announced.
CfDs are 15-year private law contracts between electricity generators and the government-owned Low Carbon Contracts Company (LCCC).   Contracts are awarded through a competitive auction, which have been run every two years since they began in 2014.
In the most recent allocation round 12 new contracts were awarded for nearly 6GW of capacity at record low prices. For the fourth allocation round in March 2023 a draft budget of £285 million has been set.
Now BEIS says increasing the frequency of auctions will give more projects the opportunity to enter the system. In a review BEIS heard overwhelming support for more frequent allocation rounds and increased certainty on timing.
Business and Energy Secretary Kwasi Kwarteng said: “We are hitting the accelerator on domestic electricity production to boost energy security, attract private investment and create jobs in our industrial heartlands. The more clean, cheap and secure power we generate at home, the less exposed we will be to expensive gas prices set by international markets.”
BEIS also confirmed that locally supported onshore wind and solar – seen as the lowest-cost option for new power generation – will be included. It said a “sustained increase in deployment” in these technologies would be needed “in the 2020s and beyond”. Including them in the 2023 and future CfD allocation rounds “will support progress towards our decarbonisation objectives at low cost”, BEIS said.

Dan McGrail, Chief Executive of RenewableUK said: “Moving to annual CfD auctions is a major step forward which will significantly accelerate the speed of our nation’s transition to net zero. It’s good news for consumers too, as it means the UK will be reducing its vulnerability to volatile international gas prices and increasing the volumes of low cost renewable energy in our energy system. There’s a huge appetite among renewable energy developers to invest in building more projects, which will help to grow the UK supply chain at a faster rate.”
Danielle Lane, UK country manager at Vattenfall and co-chair of The Offshore Wind Industry Council, said: “Annual auctions are a welcome signal to renewable investors and developers that the government remains committed to rapidly increasing the UK’s offshore wind capacity, something which is urgently needed to help our energy security and to combat climate change. Unleashing renewables will be good for the UK economy, create jobs and is the long-term answer to the energy price crisis.
“The reassurance which developers have been given today could be further strengthened by reducing the level of upfront risk that investors have to take here compared with other countries. A single agency for offshore wind development to coordinate leasing, consents and vital issues such as grid connection and environmental protection – similar to the role the Oil and Gas Authority plays for that sector – could drastically reduce the time and complexity involved in developing offshore projects.”
Dr Simon Cran-McGreehin, head of analysis at the Energy and Climate Intelligence Unit (ECIU) said: “Whilst gas producers have been profiting from rocketing gas and power prices, renewables under the ‘contracts for difference’ scheme have been paying back and cutting bills – to the tune of £35 a year from this April. Doubling down on investment in homegrown renewables will provide ongoing savings and cushion households from a future gas crisis. More frequent, annual auctions under the Net Zero target will provide a steady stream of opportunity to British renewables projects supporting jobs in levelling up areas.”

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