UK announces plans for second CfD auction

By Erin Voegele | November 10, 2016

On Nov. 9, the U.K. Department for Business, Energy & Industrial Strategy reaffirmed the U.K. government’s commitment to spend £730 million ($906.51 million) annually to support renewable electricity projects over the current parliament. The DBEIS also released details of the next Contracts for Difference auction, noting companies will complete for £290 million worth of contracts.

The application process for the next CfD allocation round is set to open in April and is open to offshore wind, advanced conversion technologies, anaerobic digestion (AD) projects of greater than 5 MW, dedicated biomass with combined-heat-and-power (CHP), and wave , tidal, stream and geothermal projects that begin operations from 2021-’22 or 2022-23. The auction is not open to wind, solar, and biomass conversion projects.

The draft CfD administrative strike price for AD projects deploying in 2021-’22 is £140 per MWh, and £135 per MWh for projects deploying in 2022-’23. For dedicated biomass with CHP, the draft strike price is £115 per MWh for projects deploying in 2021-’22 and projects deploying in 2022-’23.

According to the DBEIS, the CfD auction will result in enough renewable electricity to power approximately 1 million homes while reducing carbon emissions by approximately 2.5 million metric tons per year from 2021-’22 onwards.

The DBEIS also opened a consultation on the closing of unabated coal-fired power stations in the U.K.

The U.K. Renewable Energy Association said the consultation and auction are seen as stabilizing actions following a year-and-a-half of more than a dozen policy changes that have reduced investor confidence in the sector, slowed deployment and led to job losses. The REA, however, also questioned why solar, onshore wind and biomass conversions are being blocked to market, despite being some of the lowest-cost forms of power generation available. In addition, the REA noted that support for advanced energy-from-waste and biomass CHP is significantly capped in capacity terms while the government undertakes a review.

"It was important for investor confidence that the government fulfilled earlier pledges concerning the coal phase-out and CfD auctions, which are vital to ensure the U.K.'s low carbon future,” said James Court, head of policy and external affairs at the REA. “Technologies such as wave and tidal, energy from waste and anaerobic digestion will all play a part in the future energy mix. Global and national costs for these technologies continue to fall and we expect to see competitive bids from a wide range of developers.”

“Despite this new support, it is frustrating to see that the cheapest technologies, such as onshore wind and solar, are still being blocked,” Court continued. “We need the government to take further action to bring balance to the market because the current situation sees gas, nuclear and even diesel all get financial support while the lowest cost renewables are blocked to market.

“There is also no support again for biomass conversion, which is a pragmatic way of putting the coal plants we are decommissioning to good use,” he said. “We have an opportunity to get extra value from this existing fossil fuel infrastructure, which can be upgraded to provide low-carbon, affordable and flexible biomass power generation.”