For anyone that doubted that Net Zero will drive policy and force the UK Government to rethink approaches to deployment, the consultation issued by BEIS today on amendments to the Contract for Difference for low carbon generation should provide some reassurance.
After years of withdrawn support for onshore wind and solar and a reluctance to run the CfD allocation rounds including the Pot 1 technologies, BEIS has relented and accepts that “if we were to rely on merchant deployment of [solar and onshore wind] alone at this point in time, we may not see the rate and scale of new projects needed in the near-term to support decarbonisation of the power sector and meet the net zero commitment at low cost”
So a 2021 CfD allocation round might now include auctions for both Pot 1 (established) and Pot 2 (less established) technologies once again assuming the consultation thinking is followed.
But the consultation does not stop there- it includes a variety of other things including;
- Opening the possibility that fixed offshore wind might be given its own pot, thereby recognising that some of the other "less established" technologies such as remote island wind, geothermal, tidal etc. cannot practically compete, if put up against offshore wind and that in the future we may well need some or all of these new, diverse technologies.
- The Government is convinced that floating wind is going to have a major role to play but recognises it is still in a relatively early stage of development. BEIS is considering the possibility of a definition of floating wind, a specific administrative strike price for it and including it in the Pot 2 (less established) category potentially away from fixed offshore wind. Interestingly, one of the consultation questions asks “what further amendments to the CfD allocation process could be necessary to facilitate floating offshore wind technologies?” Does the Government have in mind minima ring- fenced amounts for floating to make sure that there will be at least some floating projects coming out of the other end of the next allocation round? If so, surely there is an argument that this should be applied to all of the Pot 2 technologies so that the UK can make sure it is giving itself the best chance of capitalising on the industrial benefits from all of floating wind, tidal, geothermal etc.
- Proposing that the CfD scheme is pushed out from the current end date of 2026 to 2030.
- Proposals are there to strengthen supply chain plans to make sure that projects awarded a CfD help the UK meet its industrial strategy objectives. Importantly it raises the consultation question “…what other compliance options [for supply chain plans] could be considered, for example by linking non-compliance to CfD payments?”
- Linking in decommissioning obligations for offshore installations into the CfD scheme.
- Consulting on what can be done as a disincentive to non delivery of a project awarded a CfD including bid bonds (£10,000 per MW is floated)
- What can be done to facilitate co-location of storage with CfD projects
- Should the milestone delivery date or all or some types of project be extended
The consultation closes on 22 May 2020 and we predict that the renewables industry and the various technologies will have a lot to say on these issues. There are some pretty big principles at stake here on pots and rules and those affected ought to make sure their interests are represented.
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The consultation proposes changes to the CfD scheme that would, if implemented, apply to contracts awarded through future allocation rounds, the next of which is planned to open in 2021