United Kingdom

United Kingdom

Next UK auction winners "will require" local content

UK: Winning projects in the next contracts for difference (CfD) auction, planned for the end of 2016, "will require" some local content, according to a UK energy minister.

Junior energy minister Andrea Leadsom
Junior energy minister Andrea Leadsom

Speaking to parliament, junior minister Andrea Leadsom said: "... in order for the UK to benefit properly from our decision to support new offshore wind, we will require UK content and the UK supply chain to be a key beneficiary of it."

A statement from a Decc spokesperson read: "We are supporting UK businesses, helping them to compete and encouraging developers to consider them so they can win offshore supply chain contracts – bringing jobs and growth to local people."

In November, UK energy minister Amber Rudd committed to holding three further CfD auctions by 2020 for offshore projects, if the industry can demonstrate as-yet-undefined cost reduction conditions.

The first auction was awarded in February 2015, with two offshore projects and 15 onshore projects, totalling 1.9GW, being granted subsidy deals.

This is not the first time a Conservative government minister has hinted towards local content laws being introduced in the UK.

In June 2014, former junior minister Michael Fallon told the RenewableUK global offshore conference in Glasgow: "Under the electricity market reform, we are also requiring developers to prepare supply-chain plans for approval of the secretary of state [for energy].

"They will need to demonstrate how their projects will contribute to growth of the UK supply chain and specifically how the projects will support the development of competition, how they will boost innovation and, critically, how they will boost skills and employment."

Subsidy-free CfDs

It is unclear whether onshore wind will be involved in any of the proposed CfD auctions in this parliament.

Leadsom, however, confirmed the government was in discussions with the industry over so-called subsidy-free CfD deals that could benefit onshore projects.

If a wind project can be built at a lower cost than that of gas, meaning it receives less government support, then it could be classed as being "subsidy-free".

"We are calling it a market-stabilising CfD, and we are listening carefully to industry on how it can be delivered," Leadsom told MPs. 

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