Renewable energy projects at risk: ‘UK’s latest plans could cause missed investments’

The industry has warned the government’s current budget for this year’s CfD auctions will not unlock the potential investment in wind, solar and tidal projects

Trade association RenewableUK has warned the government’s plans for this year’s auctions for contracts to generate clean power will fall short in attracting maximum investment in wind, solar, and tidal projects.

The Contracts for Difference (CfD) scheme, designed to encourage investment in low carbon electricity generation, risks failing to meet its targets due to tight budget constraints, according to Michael Chesser, RenewableUK’s Economics and Markets Manager.

Chesser stated that the budget and parameters set for this year’s CfD auction are insufficient to unleash the full potential of wind, solar, and tidal stream projects, citing global inflationary pressures.

He further stressed that maximising investment in low cost clean energy is crucial in providing relief for billpayers affected by the recent spike in global gas prices.

The government’s decision to reduce the tidal stream (TSE) ringfence from £20 million to £10 million in the upcoming Allocation Round 5 of the CfD scheme, has been criticised by the Marine Energy Council (MEC) as potentially harming the UK’s first-mover advantage in marine energy, increasing project costs, and reducing the number of TSE projects.

The industry is calling on the government to maintain the £20 million ringfence set in Allocation Round 4 (AR4) to support the UK’s tidal stream potential and investment in coastal communities.

Sue Barr, Chair of the MEC, said: “Maintaining the £20 million ringfence would have supported projects across the UK from the Isle of Wight to Anglesey, Orkney to Shetland.

“The industry shares the government’s desire for TSE to take the same cost reduction journey as wind and solar. This will be achieved through deployment, which requires consistency from the policy environment.”

Responding to the government’s announcement on the next CfD auction, Energy UK’s Deputy Director, Adam Berman said: “While we warmly welcome the introduction of annual auctions, there are real concerns that the government hasn’t properly recognised the cost increases and other challenges that have accumulated for renewables projects over recent months.

“The auction parameters announced today do not appear to reflect a much-changed picture for developers since the last auction. This brings the risk that it will not deliver the amount of projects and capacity that we urgently need to ensure our energy security, cut bills, and reduce emissions.”

A government spokesperson told ELN: “We are taking significant action to encourage investment in renewable generation, including our renewable energy auctions, which just last year contracted record capacity of almost 11GW of clean energy.

“This week we confirmed significant financial backing for this year’s auctions, which will be the first of our CfD round to run annually.

“This is a valuable signal to the market, introduced in response to calls from industry to run more frequent auctions and is set to bolster further investment into the sector every year.

“We are working together with the sector, including all offshore wind developers, on how we can further increase our energy security and independence through greater renewable deployment.” 

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