U.K. DECC increases CfD budget for less established technologies

By Erin Voegele | January 28, 2015

The U.K. Department of Energy and Climate change has increased the budget for new Contracts for Difference (CfD). The extra funding will increase the amount available for less established technologies, such as offshore wind and some biomass technologies.

Projects are now set to complete for £325 million ($492.18 million), an increase of £25 million when compared to the budget published in October. The original budget of approximately £200 million was announced in July. In October, the budget was increased by an estimated £95 million. With the increases, less established technologies will now compete for £260 million. 

“We are transforming the UK’s energy sector, dealing with a legacy of underinvestment to build a new generation of clean, secure power supplies that reduce our reliance on volatile foreign markets,” said Energy and Climate Change Secretary Edward Davey.

“Renewable electricity generation and investment have both more than doubled since 2010,” Davey continued. “We attracted a record breaking £10 billion worth of investment in 2014 and by making projects compete for support, we’re ensuring consumers get the best possible deal as well as a secure and clean power sector.”

According to the DECC, due to high levels of demand for contracts, projects will be required to complete for support. As a result, the department said the contracts will deliver new capacity more cheaply than previous arrangements, resulting in lower bills for consumers.

The CfD budget is split between several technology groups. The first, known as Pot 1, includes established technologies, such as onshore wind, solar, energy from waste with combined-heat-and-power (CHP), landfill gas and sewage gas. The budget for Pot 1 is £65 million, including £50 million for projects commissioning in 2015/2016 and £15 million for projects commissioning from 2016/2017 onwards.

Pot 2 includes less established technologies, such as offshore wind, anaerobic digestion and dedicated biomass with CHP. The budget for Pot 2 is £260 million, including £155 million for projects commissioning from 2016/2017 onwards, and £105 million for projects commissioning from 2017/2018 onwards.

The third category, Pot 3, includes biomass conversions. No budget has been released for Pot 3 this allocation round. However, the DECC has indicated this does not preclude a budget being allocated to this pot in future allocation rounds. According to the DECC, the budget for next year’s auction will be confirmed this fall.

Auctions to compete for the contracts are scheduled to start Jan. 29 and close Feb. 4. The National Grid is scheduled to notify applicants of the outcome of the allocation process on Feb. 26, with contracts due March 27. Projects that win this year’s auction will receive 15-year contracts.

The U.K. Renewable Energy Association has issued a statement welcoming the budget increase for less established technologies and expressing concern over the CfD policy. “We welcome an increase in the CfD budget, and await with interest the outcome of the first allocation round,” said Frank Gordon, a policy analyst with REA. “However, there remain concerns around CfD policy particularly for independent generators and other established and cost effective technologies such as solar and biomass which must be addressed by the next government following the election.”