Energy secretary Ed Miliband today (31 July) announced that the budget for the UK's next contracts for difference (CfD) renewable energy tender would be £530 million more than previously planned.
It includes a £1.1 billion allocation for offshore wind projects using fixed-bottom foundations – a £300 million uplift from a previous proposal.
The new budget also earmarks £185 million for established technologies such as onshore wind and solar, marking an uplift of £65 million. Meanwhile, £270 million will be made available for less-established technologies such as floating offshore wind and tidal, an increase of £165 million.
Miliband described last year’s auction round – held while the Conservative Party formed the UK government before being voted out earlier this month – had been a “catastrophe” after offshore wind developers avoided the tender completely.
“Instead, we are backing industry to build in Britain, with this year’s auction getting its biggest budget yet,” Miliband said. “This will restore the UK as a global leader for green technologies and deliver the infrastructure we need to boost our energy independence, protect billpayers, and become a clean energy superpower.”
Project developers can now bid for a share of this funding through the government's renewable energy auction, which awards subsidies for projects across the UK. These subsidies are paid back once wholesale electricity prices exceed the contracted price, or 'strike price'.
Industry reaction
This increase to the ongoing CfD round's budget could significantly increase the UK’s total wind capacity, experts believe. Previously, industry think tank Ember, warned that if the new government – which was voted in on 4 July – did not increase the budget, then it risked missing its target of quadrupling offshore wind capacity by 2030.
However, the Aurora Energy Research consultancy has now estimated that the new budget could enable 5.8GW of offshore wind capacity wining power deals.
“Assuming an auction clearing price of £60/MWh, this auction could deliver 5.8GW of offshore wind capacity, 1.6GW more than [could have been delivered] under the previous budget. Once operational, this wind capacity could supply power equivalent to 10% of 2023 electricity demand,” said Tom Betts, a senior research analyst at Aurora Energy Research.
Meawhile, energy market consultancy Cornwall Insight believes that the updated budget could support at least 4.3GW of offshore wind contracts, which it calculated would be 1.2GW more than the previous budget could have supported.
The wind industry has largely welcomed the budget increase.
Dan McGrail, the CEO of industry body RenewableUK, said it was "great to see government choosing to unlock more investment in renewable energy projects". But he added: "This auction will not unlock investment in all shovel-ready projects, so the government will need to ensure that the next auction rounds focus on project delivery to ensure we achieve the prime minister’s clean power mission and increase the confidence of investors in the UK’s supply chain."
Meanwhile, Jessica Hooper, director at RenewableUK Cymru – the industry body's Welsh division – said the budget uplift from £105 million to £270 million for emerging technologies, such as floating offshore wind, is most welcome. Floating wind projects are being planned off Wales, with developers hoping to secure seabed leases in the ongoing Celtic Sea round.
“However, this is still not enough to deliver all eligible UK projects,” Hooper said. “Moving forward, in future allocation rounds, we need to guard against unwanted regional competition and ensure that as many new offshore windfarms as possible are built, including the test and demonstration sites in the Celtic Sea, to encourage innovation and drive cost reduction.”
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