News | Headlines Record–breaking UK auction results UK Finance
The UK government on 3 September released the results of its Sixth Contracts for Difference (CfD) auction (AR6), with 131 projects securing 9.6 GW of renewable capacity – a substantial increase from the 3.7 GW secured at last year’s auction.
The results are reflective of the record high budget, which was set at £1.56 bn (2011-12 money), but also the rising cost of renewables projects over the past three years. Among the 131 successful projects were nine offshore wind farms totalling 4.9 GW, a 400 MW floating wind scheme (Green Volt), and six tidal stream projects totalling 28 MW. Onshore, 22 wind projects (totalling 990 MW) were successful, along with 3.3 GW of solar, at £50.90/MWh.
The greatest successes were recorded by solar PV and offshore wind, but despite the positive results and improvements on AR5, there remains a significant shortfall against new government targets. Next year’s allocation round may show whether the new-look UK energy industry has successfully set it on the path to both its ‘green powerhouse’ role and its Net Zero target.
Key outcomes were: Offshore wind: 4.9 GW of new offshore wind capacity securing agreements brings the estimated total capacity to be built or contracted under the CfD (or previous schemes) to an estimated 28.6 GW. This is below the 55 GW target set by the UK’s new Labour government as part of its ambition to quadruple offshore wind capacity by 2030. The prices achieved in this round (£58.87/ MWh for brand new capacity and £54.23/ MWh for ‘Permitted Reduction’ capacity, reckoned at 2012 prices) underscore the value of competitive auctions, with offshore wind strike prices for new build sites coming in more than 19% below the cap of £73/MWh (again, at 2012 prices). However, these prices are still well above the record lows of £37.35/ MWh seen in AR4. But it is worth noting that 1.4 GW of this capacity terminated its contracts owing to insufficient pricing.
Floating offshore wind: in a significant boost, floating offshore wind secured 400 MW of contracts in AR6, thanks to the largest commercial floating offshore wind project in the world. But it falls short of the government’s 5 GW 2030 target outlined in its Green Prosperity Plan. Its price of £139.93/MWh (2012 prices) remains well above fixed bottom offshore wind sites, owing to the currently less established nature of the technology. Solar power: solar emerged as one of the most successful technologies in AR6, securing 3.3 GW, owing to a strong pipeline of assets across many GB regions and its competitive edge over onshore wind. Combining operational and future CfD contracted capacity, total GB solar PV capacity is expected to reach at least 23.3 GW. However, this remains well below the 50 GW target set in the Green Prosperity Plan. Solar PV’s price of £50.07/MWh (at 2012 money) is above the prices achieved in both AR4 (which was £45.99/MWh) and AR5 (which was £47.00/ MWh, the maximum allowable price for the auction), reflecting the increase in maximum allowed prices in AR6, trends of increased development costs, and the larger budget and subsequent capacity levels procured. Onshore wind: onshore wind saw comparatively smaller volumes awarded (1.0 GW), with the majority of contracts going to Scottish sites. This reflects the challenges the technology faces, including stringent planning restrictions in England since 2015 and the relatively high network charging environment in Scotland making the projects less competitive. Recent changes to planning rules for onshore wind by the new government may alter this trend, in time. One English wind farm secured a contract, the 8 MW Alaska wind farm, against 18 Scottish sites (909 MW) and three Welsh sites (72.6 MW). Onshore wind achieved a price of £50.90/MWh (2012 money), slightly below the £52.29/MWh (2012 money) in AR5 but well above the AR4 price of £42.47/MWh, also reflective of rising trends in development costs over the last few years. The relatively low capacity of onshore
$1 bn to advance marine energy USA Marine energy
US Congresswomen Nanette Barragán and Suzanne Bonamici have brought to Congress their Marine Energy Technologies Acceleration Act, new legislation that would invest $1 bn in advancing marine energy towards full scale commercialisation.
The Act would provide unprecedented levels of funding to the Department of Energy’s Waterpower Technologies Office for demonstration projects, research and
wind to secure contracts meant that only the cheapest and most competitive sites were successful. Tidal stream: tidal saw some success, securing 28 MW. The price (at £172.00/ MWh, 2012 money) has come down since the previous auction, by 13% on AR5, but remains well above prices for more established technologies due to its nascent development status. Consumer costs: the budget used for this auction was £1.285 bn (2012 prices), meaning some of the budget, 300 m, was not utilised. This shortfall mostly came from Pot 3 (offshore wind), where it is likely that the next asset in the auction stack was a large offshore wind asset resulting in the budget’s being breached (and therefore the project unsuccessful) and the auction’s being cleared. The true costs to consumers will depend on energy market conditions when the assets become operational. Transparency will be important to ensure consumer buy-in on the net zero journey.
Critical importance
Tim Dixon, a senior consultant at Cornwall Insight, commented: “[These] CfD results demonstrate the critical importance of competitive auctions in driving the cost-effective expansion of renewable electricity in the UK. We have seen some strong progress, particularly in solar, and fixed and floating offshore wind, with prices that are both above record lows but below allowed maximums, reflective of the economic conditions faced by the sector. “However, the reality is that there remains a significant gap between contracted capacity and the amount needed if the government is to meet its ambitious 2030 targets. Renewables projects take years to build and become operational and there is just five years left to achieve a decarbonised electricity grid. With AR7 expected to open to applications next March, the government must focus on enabling more projects to secure planning permission and grid connections to ensure a credible and sufficient pipeline for future development.”
development, detailed resource potential mapping, workforce development, and more efficient permitting processes.
Ms Barragán commented: “With [the Act], we can usher in an emerging clean energy resource to help our nation and our communities meet clean energy and decarbonisation goals”.
“Marine energy has [immense] potential, but the industry’s progress has been hampered by inconsistent and limited federal investment.
4 | September 2024 |
www.modernpowersystems.com
[The Act] would catalyse the development of the marine energy field and support the coastal communities where technology demonstrations occur,” said Ms Bonamici. This federal legislation parallels the upcoming wave energy demonstration project to be implemented by Eco Wave Power and Shell MRE at Altasea, Port of Los Angeles, where Eco Wave Power will install the first US onshore wave energy pilot station during the coming months.
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