The Government has awarded funding for 27 renewable energy projects in its landmark first Contracts for Difference (CfD) auction, although the solar industry was left underwhelmed by the results.
The CfD scheme, part of the Government’s electricity market reform plan to shift the grid towards low carbon energy, guarantees power purchase prices for 15 year for renewable energy generators offering the cheapest electricity.
The aim of the scheme is to support the delivery of new renewable electricity capacity at the least cost to the consumer.
Included in the 27 successful bids from the auction were 15 onshore wind projects, five solar PV projects, two offshore wind projects and two energy-from-waste projects.
The winning generators will share up to £315 million a year, with the Government estimating that future auctions could lead to over £1 billion a year being spent by 2020/2021.
In total, these will generate 2GW of capacity for the grid, enough to power 1.4 million homes. The Government also estimates that the projects will be £110 million a year cheaper for the taxpayer due to competition driving down prices.
James Murray, editor of BusinessGreen, said: “You don’t have to understand the finer points of CfD auction procedures to understand we are on the brink of a genuine revolution in how we generate and use energy.
“Through one wave of projects, [the CfD auction will] deliver 2GW of capacity…and cut greenhouse gas emissions by four million tonnes a year. And that is one wave of projects. Another wave will come in the autumn, and more will follow after that.”
Despite receiving praise for its potential, the first results from the CfD have not been welcomed by all.
Solar PV largely lost out to costlier wind power, despite offering the cheapest electricity prices, with one solar project bidding £50/MWh – less than half the maximum price the government was willing to pay for it.
As ‘mature’ technologies, onshore wind and solar PV are forced to compete with each other for CfD contracts. However, the solar industry has argued that the smaller size of companies in its sector means that it is less able to compete with larger wind projects.
‘Favours big players’
Paul Barwell, chief executive of the Solar Trade Association (STA), said: “The soon-to-be cheapest and most popular renewable – solar power – has lost out in a complex auction scheme that favours big players and genuinely established technologies.
“It is likely that very few solar companies even submitted a bid for a contract. The problem is that it was just far too much of a risk for a small or medium-sized solar company to even put in a bid.”
The solar industry will hope that future CfD auctions will be amended to provide better support for SMEs in the solar sector.