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UK government announces £290m of CfD funding

The Department for Business, Energy and Industrial Strategy (BEIS) has announced GBP 290 million of Contracts for Difference (CfD) funding for renewable electricity and consultation on proposals to end unabated coal power generation by 2025.

In an announcement from the Department for Business, Energy and Industrial Strategy (BEIS), pre-Brexit known as the Department of Energy and Climate Change, the UK government has “reaffirmed” its earlier commitment announced in the March 2016 Budget, to spend GBP 730 million of annual support on renewable electricity projects over this parliament. It also set out further details for the next Contracts for Difference (CfD) auction where companies will compete for the first GBP 290 million worth of contracts for renewable electricity projects.

This allocation round is for “less established technologies” named as offshore wind, “Advanced Conversion Technologies”, anaerobic digestion (>5W), dedicated biomass with combined heat and power (CHP), wave, tidal stream and geothermal projects starting to generate from 2021/22 or 2022/23. The application process for the CfD allocation round will open in April 2017.

Call for evidence on “fuelled technologies”

However, BEIS also announced it is to publish a call for evidence on “fuelled technologies and geothermal costs” in the CfD scheme. The purpose is to determine whether or not the support currently offered to fuelled technologies through the CfD is right to deliver “our goals on bioenergy as well as broader departmental objectives on value for money for decarbonisation”.

In the meantime, a temporary cumulative cap of 150MW, equivalent to a budget maximum of GBP 70 million, has been placed on fuelled technologies in this CfD auction as a “temporary, precautionary measure introduced while we consider these issues”.

Switch from coal to gas, nuclear and renewables

The Government has also set out proposals for the next steps to phase out electricity generation from “unabated” coal-fired power stations within the next decade.

– The government first announced its intention to take unabated coal out of the energy mix in November last year, said Business and Energy Secretary Greg Clark.

According to Clark this long-term plan will provide “confidence to investors that the UK is open to investors in new, cleaner energy capacity as we transition from coal to gas, and build a diverse energy system giving us greater security of supply, which includes record investments in renewable technology and the reliable electricity that new nuclear power investment will provide”.

In addition to a "fuelled technology cap" in the CfD, solar, onshore wind and biomass conversion are still being blocked to market.

In addition to a “fuelled technology cap” in the CfD, solar, onshore wind and biomass conversion are still being blocked to market.

Stabilising actions

The consultation and auction are seen by the Renewable Energy Association (REA) as “stabilising actions” following 18 months of over a dozen major policy changes that have “reduced investor confidence in the sector, slowed deployment, and led to job losses”.

Apart from the fuelled technology cap caveats in the CfD, REA also questions as to why solar, onshore wind, and biomass conversion are still being blocked to market, despite being some of the lowest costs forms of power generation available, even when compared to fossil gas.

– Despite this new support, it is frustrating to see that the cheapest technologies, such as onshore wind and solar, are still being blocked. 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. It’s 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, commented James Court, Head of Policy and External Affairs at the Renewable Energy Association.

– 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, Court said.

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