UK could include non-price criteria in flagship CfD scheme

Currently CfDs in the UK, excluding Northern Ireland, are awarded based on the bid price submitted by developers. This provides price certainty for their offtake for a 15-year period but the competitive nature of the scheme has driven offshore prices down by almost 70% since the first auction in 2015.

The government is now asking whether the scheme can help address concerns over returns that are too low for investors, by capturing “the wider value of renewables projects”. Non-price factors could reflect sustainability, innovation, skills or building the supply chain, or giving projects the technical capability to provide grid services. 

Energy security and net zero minister Graham Stuart pointed out that the scheme had supported low-carbon electricity generation, while also driving down costs for the benefit of consumers. But he added: “We want to go further to ensure we maximise the scheme’s potential to improve energy security and ensure renewable energy developers can make the necessary investment in supply chains and innovation.” 

Industry body RenewableUK’s executive director of policy Ana Musat said designing the right framework for Contracts for Difference was crucial if “we’re to attract the billions of pounds of private investment we need to build more clean energy projects faster”.  

“Going forward, it’s clear that awarding CfDs shouldn’t just be based on a race to the bottom on prices, but it should also take account of the wider economic and environmental benefits which this industry can deliver,” she said. 

If the call for evidence identifies appropriate changes to the CfD scheme, the government will launch a consultation on more detailed proposals. As with the current Supply Chain Plan, new measures may apply only to larger projects. 

The UK’s latest CfD round opened to applications in March, with results due to be announced in late summer or early autumn this year.