The UK Government has increased the budget available for the upcoming Contract for Difference (CfD) Allocation Round 6, which could help with bolstering the capacity of renewable energy in the UK.
It’s well known that CfD Allocation Round 5 was a bit of a disaster, securing less renewable capacity than it had done in previous years. It also secured no offshore wind at all, which is surprising given the UK’s leading role within the offshore wind market.
On the back of that disastrous round, many in the industry called for reforms to be made to the CfD process, as well as an increase in the amount of funding that was available to ensure that it secured more renewable capacity. The UK Government has now responded by promising to allocate more money to this round.
The UK government has increased the budget for the upcoming Contract for Difference (CfD) Allocation Round 6 by an additional £0.53 billion, raising the total to £1.56 billion. This enhancement is anticipated to significantly bolster the capacity for renewable energy, particularly offshore wind.
According to Cornwall Insight, the revised budget is set to support at least 4.3GW of offshore wind capacity. This figure represents about 25% of the current total GB offshore wind capacity and marks a substantial increase of 1.2GW over what was expected with the original budget. The final amount of capacity secured will hinge on the participation and bidding strategies of developers in the auction.
For established renewable technologies such as onshore wind and solar, which compete in the same funding ‘Pot,’ the additional capacity will largely depend on the dynamics of the competition among them. Assuming maximum bid prices, the new budget could potentially underpin an additional minimum capacity of 0.4GW for onshore wind (totaling 1.2GW) and 1.8GW for solar PV (reaching a total of 5.2GW).
Tim Dixon, Senior Consultant at Cornwall Insight, commented on the budget increase, saying, “The increase in the auction budget will be welcomed by renewable developers and is a great opportunity for the sector to demonstrate it can continue to reduce emissions, while offering value for money and improving energy security in a time of global volatility.”
He further added, “Although we have already seen changes such as a rise in administrative strike prices to avoid the disappointing results seen at the previous CfD auction, the additional funding will hopefully further boost capacity levels whilst maintaining strong levels of competition.”
However, Dixon noted that while the funding increase is a positive step for renewable energy development, it does not address all the sector’s concerns or guarantee a reduction in consumer energy bills. “To ensure this extra funding truly boosts sustainable energy generation, we must also tackle the broader issues including a lack of grid connections, inadequate infrastructure, planning frameworks, and long-term service designs. Without these changes developers and consumers alike may feel they have been short changed.”