United Kingdom

United Kingdom

UK awards first CfD round

UK: The UK government has awarded its first competitive Contracts for Difference (CfD) subsidies to onshore and offshore projects, totalling 1.9GW.

Secretary of state for energy and climate change, Ed Davey
Secretary of state for energy and climate change, Ed Davey

A total of 17 wind projects were awarded CfD's as part of the new support scheme being introduced in the UK. Renewable energy developers have taken part in a competitive auction process to win state support. Onshore wind, offshore wind, solar and energy from waste projects have all been handed CfDs.

Over 748MW of onshore capacity across 15 projects have been handed contracts with the largest being the 177MW Dorenell wind project developed by Infinergy in Scotland.

CfDs guarantee developers a price for the electricity produced for 15 years. The average price awarded for onshore wind was £80.57/MWh (€110/MWh) while offshore projects averaged £117.14/MWh (€160/MWh).

Compared to German offshore prices, the payment rate for projects going on line in 2015, 2016 and 2017 is €194/MWh for eight years, falling to €39/MWh (approximately equal to wholesale market price) for the following 12 years. 

Alternatively, project owners in Germany can choose a lower rate of €154/MWh for the longer period of 12 years followed by €39/MWh for the following eight years.

Offshore

Two offshore projects won CfDs totalling over 1.1GW. Scottish Power's reduced East Anglia One project in the North Sea and Mainstream Renewable Power's 448MW Neart Na Gaoithe off the coast of Scotland.

East Anglia One was originally planned to have a 1.2GW capacity. According to the Department of Energy and Climate Change (Decc) documents, it will now be 714MW. Scottish Power said the project could still reach 1.2GW as it will look to gain support for more capacity in future auctions.

In October, Scottish Power's chief operating officer Keith Andersen said the project would be cut to fit within the CfD budget at the time of £235 million (€321 million). Trade body RenewableUK said that amount would accommodate up to 800MW of new capacity.

Today, Scottish Power announced it has acquired development partner Vattenfall's 50% share of the project, making the Iberdrola subsidiary sole owner of the project. Vattenfall will remain part of the East Anglia Zone, helping to develop two further projects in the zone.

For wind projects, the maximum guaranteed prices were set by the government at £95/MWh produced onshore and £155/MWh for offshore. RenewableUK said the lower strike prices awarded aided the greater than expected capacity. Decc also increased the CfD budget for a second time in January. 

East Anglia One was awarded contract with a strike price of £119.89/MWh and Neart Na Gaiothe agreed a price of £114.39/MWh.

Project Name Developer Technology Capacity (MW) Strike Price (£/MWh) Delivery Year
East Anglia One ScottishPower Renewables Offshore Wind 714 119.89 2017-18
Neart Na Gaoithe Mainstream Renewable Power Offshore Wind 448 114.39 2018-19
Dorenell Wind Infinergy Onshore Wind 177 82.50 2018-19
Kype Muir Banks Renewables Onshore Wind 104 82.50 2018-19
Clocaenog Forest RWE Innogy UK Onshore Wind 96 82.50 2018.19
Middle Muir Banks Renewables Onshore Wind 60 82.50 2018-19
Brenig Wind Brenig Wind Ltd Onshore Wind 45 79.23 2016-17
Mynydd Y Gwair RWE Innogy UK Onshore Wind 40 79.99 2017-18
Tom nan Clach Infinergy Onshore Wind 39 82.50 2018-19
Solwaybank RES Onshore Wind 37.5 82.50 2018-19
Sneddon Law Community Wind Community Wind; Onshore Wind 37.5 79.99 2017-18
Coire Na Cloiche Coire Na Cloiche Windfarm LLP Onshore Wind 30 82.50 2018-19
Bad a Cheo RWE Innogy Onshore Wind 29.9 82.50 2018-19
Tralorg PNE Wind Onshore Wind 20 82.50 2018-2019
Moor House Banks Renewables Onshore Wind 16.4 82.50 2018-19
Achlachan Whirlwind Renewables Onshore Wind 10 82.50 2018-19
Common Barn TCI Renewables Onshore 6.15 82.50 2018-19

The two offshore projects join the five that were awarded final investment decision enabling contracts last summer.

They are Dong Energy's 258MW Burbo Bank Extension and 660MW Walney Exension in the Irish Sea and its 1.2GW Hornsea 1 in the North Sea. Repsol and SSE's 664MW Beatrice in the north east of Scotland was also given the green light to claim the subsidies. And Dudgeon, a 400MW site being developed by Statkraft and Statoil, was also awarded.

Galloper

It is unclear which renewable energy projects made bids in the auction process, but it is likely that a large amount of capacity has missed out on this occasion. A second auction process is expected to take place in autumn 2015.

Other projects likely to have taken part in this first round include EDPR's Inch Cape and Moray Firth totalling over 1GW and E.on's 400MW Rampion. 

RWE's revived 340MW Galloper project was one that took part in the auction but failed to win a contract. Galloper, however, remains eligible for the outgoing Renewables Obligation support scheme.

RWE managing director Paul Cowling said: "We knew that the first round of auctions for a CfD would be a highly competitive process.

"Despite our disappointment not to have secured a CfD for Galloper, the project remains eligible for the Renewable Obligation and we will continue to work closely with out supply chain partners regarding this alternative."

There was some good news for RWE however, as three of its onshore projects, with a combined capacity of up to 177MW, were awarded CfDs. The 48MW Mynydd-y-Gwair and the 96MW Clocaenog projects in Wales and the up-to-33MW Bad a Cheo project in Scotland placed successful bids.

Strike Price

Under the CfD scheme, renewable energy projects will be handed a 15-year contract, which guarantees a set price for the electricity produced.

The fact that developers were able to make bids far below the original strike price allowed more capacity to be awarded contracts. 

Renewable UK chief executive Maria McCaffery said: "The highly competitive prices achieved during this auction highlight the fact that the industry has been working hard to bring costs down."

The offshore industry and the government is aiming to reduce the cost of producing electricity to £100/MWh by 2020 for offshore projects.

The budget for next year's allocation round is yet to be announced but Decc has indicated an extra £50 million could be available for the established technologies pot, which includes onshore wind.

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