Solar PV projects came out as one of the big winners of the latest Contracts for Difference (CfD) auction, with a total of 93 ground-based solar projects being awarded contracts.
While the latest CfD auction set a new record for the number of projects, some industry insiders have expressed concern about the overall capacity secured, which was lower than the 2022 auction. However, that’s not a sentiment reflected by those advocating the rollout of more solar in the UK – with it securing a record amount of capacity, surpassing the previous high of 2,209MW from 66 projects in 2022’s fourth allocation round.
Solar projects contracted this round are scheduled for delivery in staggered phases: 884 MW by 2026, 509 MW by 2027, and 1,895 MW by 2028. Remarkably, the strike price for solar farms has been set at £50.07 per megawatt-hour, showing minimal increase from last year’s £47/MWh due to stable inflation rates.
Additionally, for the first time in the UK, a solar farm over 50MW, EDF Renewables’ Longfield development in Hertfordshire, has been granted a CfD. This marks a shift as the project was approved at a national rather than local level, reflecting a significant development in solar farm approvals.
Despite no CfD bids from offshore wind last year, the bulk of this auction round was claimed by the sector with a slightly higher strike price of £50.90/MWh. When compared to the current wholesale electricity costs, which range from £61 to £87 per megawatt-hour, both wind and solar power continue to represent a more economical alternative.
Highlighting the economic benefits of renewable energy, the cost contrast is stark with the Hinkley Point C nuclear project, which was offered £92.50/MWh, and a new combined-cycle gas asset projected at about £114/MWh for 2025.
Gemma Grimes, Director of Policy and Delivery at Solar Energy UK, underscored the significance of the auction results, “Today’s welcome announcements demonstrate yet again that solar and wind power are the cheapest source of power available in the UK. It is hugely encouraging to see an unprecedented volume of solar generation capacity contracted, enough to put a meaningful dent into future electricity prices. Similar levels of contracted capacity will be needed each year to meet our net zero ambitions,” she commented.
The Government has set a target of 50GW for solar energy by 2030. To achieve this, an average of 3.3GW of ground-mounted solar capacity needs to be delivered annually for the remainder of the decade. This year’s clearance is remarkably close to this annual target, with further capacity anticipated through corporate power purchase agreements and direct sales to the grid as ‘merchant’ facilities. An additional 10GW is expected to be installed on rooftops.
Grimes added, “The CfD system is currently working well for solar. We look forward to future allocation rounds and will work with the Government to deliver the capacity necessary to meet its renewable energy targets. Having greater visibility of future budgets for the years to come would help achieve this.”