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United Kingdom

United Kingdom

Onshore wind cleared to compete in UK CfD tenders

UK: Wind projects on remote Scottish islands have been cleared to apply for support in the next contract for difference (CfD) auction to be held in spring 2019.

Proposed wind farms on Shetland (above), Orkneys and Hebrides can now bid for CfD deals
Proposed wind farms on Shetland (above), Orkneys and Hebrides can now bid for CfD deals

The announcement was made as the government’s Department for Business, Energy and Industrial Strategy (BEIS) unveiled its repeatedly delayed Clean Growth Strategy.

It follows yesterday’s announcement that up to £557 million (€622.95 million) would be made available for the "next clean electricity auctions for less established renewables", with the next tender to be held in spring 2019.

That auction would be the UK’s third renewables tender, following September’s auction in which two offshore wind projects were awarded CfD deals at under half the price of contracts awarded in February 2015.

A 2013 report for the UK and Scottish governments concluded that wind projects on the Western Isles, Orkney and Shetland off the coast of Scotland could supply around 3% of the UK’s total electricity demand.

Today’s announcement means proposed projects on these remote islands would be eligible to bid in the spring 2019 auction.

Secretary of State for Scotland, David Mundell MP said: "Wind projects on the remote islands of Scotland have the potential to generate substantial amounts of electricity for the whole of the UK and I am delighted they will have the opportunity to compete in the next round of contracts for difference."

Other announcements

The government also announced it would work with the offshore wind sector to develop a "sector deal" and set a target of an additional 10GW of capacity to be built in the 2020s "with the opportunity for additional deployment if this is cost effective"

It also said £177 million (€197.48 million) would be made available "to further reduce the cost of renewables", with offshore wind and floating wind projects among technologies being specifically targeted.

Ministers would also work with the Crown Estate and the Crown Estate Scotland – the UK’s seabed landlord – to "understand the potential for deployment of offshore wind in the late 2020s and beyond", BEIS announced.

It was also suggested that funding from the £200 million (€223.14 million) Rural Development Plan for England’s Growth Programme and Countryside Productivity Offers "could be used to support renewable energy projects, such as solar panels or small wind turbines linked to battery storage".

Business and Energy Secretary Greg Clark said: "This government has put clean growth at the heart of its Industrial Strategy to increase productivity, boost people’s earning power and ensure Britain continues to lead the world in efforts to tackle climate change."

Other policies announced in the Clean Growth Strategy included:

  • setting up a UK Green Finance Taskforce to provide recommendations on investment to "maximise the UK’s share of the global green finance market;
  • investing up to £100 million (€111.57 million) in developing carbon capture usage and storage (CCUS);
  • investing around £3.6 billion (€4.01 billion) to make around one million homes more energy efficient;
  • spending £1 billion (€1.11 billion) to aid the take-up of ultra-low emission vehicles as the sale of conventional petrol and diesel cars and vans is ended by 2040;
  • investing around £841 million in driving low-carbon transport technology (€938.31 million);
  • phasing out the use of unabated coal to produce electricity by 2025;
  • delivering new nuclear power through the Hinkley Point C plant in Somerset;
  • establishing a new network of forests and planting 1,000,000 new trees.

Reaction

Industry leaders and clean energy lobbyists have broadly welcomed the government’s Clean Growth Strategy, but some commentators have called for more detailed plans to be published.

Some have argued all solar PV and onshore wind projects should be allowed to compete in CfD auctions, while others claim the government needs more ambitious plans to reduce CO2 emissions.

The managing director of Dong Energy UK, which secured a contract for its Hornsea Project Two under the UK’s CfD auction in September, said offshore wind could be the "backbone" of the UK’s energy system.

Matthew Wright said: "The ambition and commitment represented by the Clean Growth Strategy is fantastic news for the renewable energy industry and is very much in line with our own vision to create a world that runs entirely on green energy.

"We look forward to working with government to help realise the aims of this new strategy.

"Offshore wind can be the backbone of the UK’s energy system, providing a substantial source of green energy for consumers, as well as creating high quality jobs across the country in a thriving UK supply chain.

"By retaining its global leadership position, the UK is also well placed to export products and services overseas.

"Offshore wind is now competitive with other forms of generation, as seen in the recent CfD auction which saw the lowest ever strike price for offshore wind in the UK, and we remain committed to driving down costs even further."

Greenpeace and trade bodies the Renewable Energy Association and the Energy Institute welcomed the strategy, but said more details are needed on how it will be implemented.

John Sauven, the executive director of Greenpeace UK, said the government needed to be more ambitious.

"Our small country could be a big power on low carbon solutions if we keep up the momentum, especially on energy efficiency and electric vehicles," he argued.

"The government’s punt on offshore wind has already paid off in spectacular style, and proves that clean technology, ambitious developers and government support are a winning combination.

"A smart, efficient and renewable-powered electricity system is possible. The offshore wind industry is proof you can provide jobs and regional development at low cost without leaving a legacy of nuclear waste and exorbitant decommissioning costs.

"The transport sector is now the greatest emitter of CO2 emissions: We need stronger ambition on phasing-out diesel and petrol cars before the 2040 ban, and no new runway at Heathrow.

"If (climate change and industry minister) Claire Perry and her team now puts real flesh on the bones in their strategy, we could clean up our transport, heat and power sectors."

Nina Skorupska, chief executive of the Renewable Energy Association said the "language, ambition and recommitment from Government to lower emissions" were welcome, as was the "recognition that decarbonisation and economic growth are not mutually exclusive, but are in fact linked".

She added: "The plan focuses on areas that have not been given a huge amount of time or thought to previously in government, such as industrial efficiency or the built environment, both of which are crucial and can be a win-win.

"However, for many of our members they will see very little substance in this plan and we will have to ensure we are pushing government for how they intend to address the big issues of adding low-carbon generation, greening our heat system, cleaning our transport and leading the decentralisation revolution that will lead to a cheaper and low-carbon future."

Meanwhile, Louise Kingham CEO of the Energy Institute, which represents energy professionals, said the strategy "breathes new life into decarbonising the UK".

She said: "Taking energy efficiency seriously in homes, businesses and industry will cut emissions, bring down bills and increase productivity more effectively than anything else. 

"Putting CCS (carbon capture storage) back at the table and action to tackle emissions from heat, alongside renewables, nuclear and electric vehicles make this a credible plan.

"The strategy is really important for the UK's standing on the global climate change stage, as we look to the next round of UN talks hosted by Fiji in Bonn next month.

"But meeting the UK’s carbon targets is ultimately a numbers game and the real proof will be in the delivery.

"Hitting 57% emission reduction by 2030 in a cost-effective way, and realising the big industrial wins that come with that, calls for a no-surprises investment climate.

"This includes policies aimed at getting the best deal for bill-payers, which must take a balanced, long-term view of consumer interest.

"Energy professionals are primed and ready to bring their skills to bear and be at the heart of this transition."

Others called for clarity on whether onshore wind and solar projects would be allowed to compete on the same level as power generation technologies considered "less established".

Claire Mack, chief executive of ScottishRenewables said a government commitment to work with the offshore wind industry on a "sector deal" was to be welcomed.

However, she added: "It is disappointing that no commitment has yet been made to allow [mainland] onshore wind and solar PV - the cheapest forms of new power generation - to compete for contracts to sell the clean power they produce.

"With cost reduction recognised as an important part of the continued growth of our low-carbon energy system, it is startling that cheap, popular onshore wind and solar PV are excluded once again from plans for the UK’s energy future.

"We now look forward to seeing the outcome of the government’s Cost of Energy Review, where we expect to see these lowest-cost technologies recognised as crucial for the delivery of cheap, clean power for Britain’s homes and businesses."

She also welcomed the announcement that onshore projects on remote Scottish islands would be allowed to compete alongside offshore wind and biomass heat and power in the next CfD tender.

Ms Mack added: "It remains imperative, however, that Government use the tools at its disposal to support wave and tidal technologies along the path to full commercialisation and cost reduction.

"We welcome the many positive announcements on heat and transport, and the commitment to work with industry to set out an effective long-term market framework for the heat sector beyond 2020.

"Despite the positive steps detailed in today’s Clean Growth Strategy, the government still expects to miss the fifth carbon budget unless it purchases international carbon credits.

"While the announcements made in the Strategy on cutting carbon in the heat and transport sectors in particular are welcome, the government will need to go further still if it is to meet its legal requirements on climate change and its global commitments under the Paris Agreement."

RenewableUK’s Chief Executive, Hugh McNeal, however, described the strategy as "ambitious" and capable of enabling the UK to deliver a "modern, clean energy system".

He said: "Government is clear that clean growth is a priority for the UK, and that the low-carbon sector can help to increase the competitiveness and productivity of our economy in the decades ahead, creating high-value jobs as well as taking effective action on climate change.

"However, what’s missing is clarity on how the lowest-cost technology, onshore wind, can deliver for UK consumers".  

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