The UK Government has increased the budget for low carbon projects that will be supported under the Contracts for Difference (CfD) scheme.

Projects will now compete for £325 million – a £25 million rise, which follows “high levels of demand” for the contracts, DECC said.

The extra funding will boost the amount available for “less established technologies” such as offshore wind and biomass with combined heat and power (CHP) – taking the total to £260 million.

Funding for “established” technologies such as onshore wind and solar stand at £65 million.

The long-awaited auction kicks off tomorrow and the winning projects that offer the lowest price for electricity will receive guaranteed payments for 15 years.

However, they could face penalties if they fail to deliver under DECC’s “Non-Delivery Disincentive”.

Energy Secretary Ed Davey said: “We are transforming the UK’s energy sector, dealing with a legacy of underinvestment to build a new generation of clean, secure power supplies that reduce our reliance on volatile foreign markets.

“The high demand for contracts shows that we’re one of the top places for renewables investment and the best place in the world for investing in offshore wind.”