and will last 35 years, whilst renewable developers must openly compete for 15 year contracts. Does that sound “technology-neutral” to you?!
Implications for renewables CfDs offer predictability over project revenues, shielding generators from the risk of low power prices. However, the auction process will significantly increase risk in project development. Developers must spend a lot of time and money (on planning, grid access etc) to even get to the bidding stage, and if the bid fails, they have a year to wait before they can try again. They may not be able to maintain their workforce during this wait. The days of “build and connect” are gone. Furthermore, the CfD scheme does
not oblige suppliers to do business with renewable generators in the way the RO does. This restricts market access for independent generators under CfDs, again making projects harder to finance. Utilities with deep pockets and their
own supply businesses can comfortably shoulder these risks, but independents and SMEs can’t.
Improvements on original proposals REA lobbying has helped secure several
crucial improvements, including: l Increased headline strike prices for advanced waste technologies, biomass CHP and geothermal
l Introduction of the Offtaker of Last Resort, enabling all renewable developers to demonstrate to financers that they have a guaranteed buyer for their power
l Guaranteed funding offer for at least 100MW of wave and tidal stream projects
THE NEW DECC MINISTERS POST- ELECTION WILL HAVE THE POWER
TO MAKE THESE IMPROVEMENTS, SO WE’RE MAKING SURE ALL POLITICIANS UNDERSTAND THAT RENEWABLE POWER IS VITAL FOR ENERGY SECURITY AS WELL AS CLIMATE CHANGE.’
l Removal of the requirement for CfD auction bidders to post expensive collateral l Grace periods for all developers applying
to the RO before it closes, including: l
l
less onerous eligibility requirements for advanced waste technologies, biomass CHP and offshore wind
extensions for dedicated biomass, wind projects suffering radar delays and any technology suffering grid connection delays
l
improved eligibility requirements for large solar projects under the RO before support is withdrawn in April 2015
Next steps There’s much work still to be done to make CfDs work for developers at all scales and across all technologies. We’re calling for:
l Guaranteed minimum funding offers for all technologies to give the certainty they need to invest in job creation, innovation, supply chains, skills development and cost reduction
l Quarterly rather than annual allocation rounds, so that unsuccessful bidders do not face a hiatus that could cause closures and job losses
l Workable heat offtaker rules for biomass CHP
l Further improvements to grid delay grace periods for large solar projects under the RO
l Reasonable budget allocation for cost- effective and fast-deploying technologies (such as biomass power and the ‘more established’ technologies) to help address the UK’s looming capacity crunch. The new DECC ministers post-election will
have the power to make these improvements, so we’re making sure all politicians understand that renewable power is vital for energy security as well as climate change. Wind and solar are racing towards zero-
subsidy. Waste to energy and biomass are already affordable and providing flexible, baseload generation. All these technologies are cheaper and much quicker to build than nuclear. With targeted support measures (such as minimum funding offers), almost all renewable technologies will be cheaper than nuclear well before Hinkley is due to be completed. With energy the single biggest element of the UK infrastructure plan, renewables can also be a major driver of jobs, growth and sustainable economic recovery. Fixing CfDs will go a long way towards unleashing the full potential of renewable power.
REQ
www.r-e-a.net
WINTER 2014
|
RENEWABLE ENERGY QUARTERLY
| REQ 11
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