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UK's Allocation Round 4 kicks off

By: James Bernthal-Hooker 13/12/2021 Department for Business, Energy & Industrial Strategy

General Windfarms

Today (13^th December 2021), the UK government opened the fourth round of its Contract for Difference (CfD) scheme. This, the biggest round to date of the government’s renewable energy support scheme, aims to secure 12 GW of electricity capacity, more than was secured in all three previous rounds combined. It opens with £285 million a year funding for next-generation low-carbon technology.

CfDs are 15-year private law contracts between renewable electricity generators and the Low Carbon Contracts Company (LCCC). This year, eligible technologies have been expanded, now including fixed and floating offshore wind, onshore wind, solar, tidal, and other forms of energy. The aim is to create a more secure and resilient energy system as the UK transitions to net-zero.

The CfD scheme is a competitive one and has historically inspired strong interest, leading to the price per unit of offshore wind falling by approximately 65% between Allocation Round (AR) 1 in 2015 and AR3 in 2019.

“Our biggest ever renewables auction opening today will solidify the UK’s role as a world-leader in renewable electricity, while backing new, future-proof industries across the country to create new jobs”, said Business and Energy Secretary Kwasi Kwarteng. “By generating more renewable energy in the UK, we can ensure greater energy independence by moving away from volatile global fossil fuel prices, all while driving down the cost of new energy.”

Of the £285 million mentioned above, the lion’s share -- £200 million – is available for offshore wind, with an additional £75 million for emerging technology, which includes floating offshore wind (for which £24 million has been ringfenced) as well as remote island wind and tidal stream. £10 million is available for established technologies such as onshore wind and solar.

The focus on offshore wind is not surprising as the UK government has an ambitious target of achieving 40 GW, including 1 GW of floating, by 2030. The supply chain plan process has been strengthened to enable AR4 to support the development of open and competitive supply chains. There is no capacity cap for offshore wind in this round.

Energy and Climate Change Minister Greg Hands said: “The Contracts for Difference scheme is proof that green and growth go hand-in-hand as it continues to be a key driver behind the world-leading renewable energy sector that is providing us with secure clean energy, creating jobs across the UK and opening investment and export opportunities.

“The previous 3 rounds have allowed us to push forward with the Green Industrial Revolution and this round will take us further and faster than ever before while continuing to drive down costs for consumers.

There has also been a strengthening of the supply chain plan process, so the CfD’s fourth round can support the effective development of open and competitive supply chains and promote innovation and skills in the low-carbon electricity generation sector.”

The CfD application window will close on 14th January 2022. Final auction results are expected to be announced later in the year, so in Spring or Summer 2022.

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

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UK's Allocation Round 4 kicks off

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