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BEIS launches CfD consultation

By: Tom Russell 03/03/2020 4C Offshore

General Windfarms

The UK government's Department for Business, Energy & Industrial Strategy (BEIS) has opened a consultation for its Contracts for Difference (CfD) scheme.

CfDs incentivise investment in renewable energy by providing developers of projects with high upfront costs and long lifetimes with direct protection from volatile wholesale prices, and they protect consumers from paying increased support costs when electricity prices are high. The CfD scheme, together with the bespoke CfD contracts signed in the early days of the scheme, has so far awarded contracts to around 16GW of new renewable electricity capacity, including nearly 13GW of offshore wind capacity.

Technologies in the auction are set into two pots 'established and 'less established' technologies and are titled Pot 1 and Pot 2 respectively. These groupings were formed on the basis of technology and industry maturity and aim to drive value for money whilst also retaining optionality for the development of technologies that have potential for further cost reduction and to play a significant role in the UK energy mix

Ahead of its fourth auction round (AR4), the government has launched a consultation which proposes changes to the CfD scheme that would, if implemented, apply to contracts awarded through future allocation round. AR4 is planned to open in 2021 subject to any required state aid approval of planned changes.

Changes in the consultation include the addition of floating offshore wind as its own technology. BEIS stated that floating offshore wind would be subject to its own distinct administrative strike price, so that projects may compete in future auctions for ‘less established’ technologies in Pot 2.

With regards to floating offshore wind, BEIS' consultation includes feedback on potential trajectories of floating offshore wind deployment in the UK and globally; a proposed legal definition for floating offshore wind projects; and what wider benefits or disadvantages floating offshore wind projects may bring to the UK.

BEIS is also consulting on whether it should separate offshore wind into a separate port to other technologies in the auction. Currently sitting in Pot 2, the government body stated that offshore wind has distinct characteristics and potential compared to other technologies in the CfD scheme, which may make it more suitable to be placed in a separate third pot. The introduction of a third pot would be subject to any applicable regulatory approval.

The consultation closes at 11:45pm on 22 May 2020 and those wishing to provide feedback must do so before the deadline. For more information on the consultation, click here.

Last year (20 September 2019) the government published the results of the third CfD allocation round, which saw contracts awarded to 5.8 GW of new renewable energy projects. This saw the costs of offshore wind fall by around 30% from the previous allocation round in 2017. The successful offshore wind projects included the Doggerbank Creyke Beck A (£39.65/MWh), Doggerbank Creyke Beck B (£41.61/MWh), Doggerbank Teeside A (£41.61/MWh) Forthwind (£39.65/MWh), Seagreen Phase 1 (£41.61/MWh) and Sofia (£39.65/MWh) offshore wind farms. The cumulative capacity of these awarded projects exceeds 5.4 GW.

For more information on offshore wind farms worldwide, click here.

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BEIS launches CfD consultation

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