Green energy auction lowers subsidy requirements

Print this page Email a link to this page

The results of the government’s second contracts for difference (CfD) or ‘green energy’ auction are in and the outcome is certainly interesting.

11 new renewable energy projects will be built over the next few years after a successful auction for ‘guaranteed’ price electricity supply contracts.

The new projects will provide up to 3GW of capacity to the UK’s electricity supply system. The technologies supported by the auction included offshore wind, advanced conversion technologies and dedicated biomass with combined heat and power.

Low, low prices

The really interesting aspect to the results is the degree to which winning strike prices have come in lower than expected, certainly compared to indicative strike prices. Offshore wind clearing price at auction for delivery in 2022/23 is now half that of clearing prices for projects commissioning in 2018/19, as low as £58/MWh.

Large scale offshore wind appears to be becoming one of the more cost competitive energy generation technologies, potentially lower than current new nuclear generation. Of course there is the issue of large scale electricity storage to be addressed before wind could be regarded as a reliable base load provider.

Thousands of offshore wind jobs

On announcing the auction results Richard Harrington, Minister for Energy and Industry, said: “We’ve placed clean growth at the heart of the Industrial Strategy to unlock opportunities across the country, while cutting carbon emissions.

“The offshore wind sector alone will invest £17.5bn in the UK up to 2021 and thousands of new jobs in British businesses will be created by the projects announced today. This government will continue to seize these opportunities as the world moves towards a low carbon future, and will set out ambitious proposals in the upcoming Clean Growth Plan.”

Energy expert analysis

The fairly dramatic fall in future subsidy needs for the successful projects under the contracts for difference auction are very welcome. It indicates just how far the technology and engineering involved in developing low carbon energy projects has come.

If coupled with similar developments in large scale electricity storage, we could be about to see a significant and positive impact on the future development of the UK’s electricity system.”

Alastair Fells MEI, Incorporated Eng, PG Dip Fuel Tech, BSc Hons

To find out how our energy law specialists can help your business, please contact Andrew Davison on 0191 211 7950 or to read more click here.