Solar and tidal included in record 11GW CfD round

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The fourth Contracts for Difference (CfD) round has closed with nearly 11GW of new renewables projects secured for the UK’s energy system in the coming years.

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Almost 7GW of new offshore wind makes up the bulk of the new CfD, with around 2.2GW of solar, 1GW off onshore wind and 0.6GW of inland wind making up most of the remainder. For the first time ever, floating offshore wind (FLOW) and tidal stream generation are included in a UK CfD, accounting for 32MW and 41MW respectively – relatively low figures that will be expected to increase in future auctions as the technology matures.

What are CfDs?

  • Contracts for Difference are 15-year private law contracts between renewable electricity generators and the Low Carbon Contracts Company (LCCC), a government-owned company that manages CfDs at arm’s length from government

  • Contracts are awarded in a series of competitive auctions, known as allocation rounds, which have been run approximately every 2 years but will be held annually from March 2023. In the auction process, the lowest price bids within each pot and/or ringfence are successful, which drives efficiency and cost reduction

  • CfDs give greater certainty and stability of revenues to electricity generators by reducing their exposure to volatile wholesale prices, while protecting consumers from paying for higher costs when electricity prices are high

Overall, the new capacity will generate electricity at a cost around four times lower than the current gas price. Adjusted in line with 2012 prices (around 20 per cent lower than today’s actual prices) in order to aid historical comparison, the new solar capacity in the latest CfD will come in at £46/MWh, with onshore wind at £42/MWh and offshore wind at just £37/MWh.

“Eye-watering gas prices are hitting consumers across Europe,” said business and energy secretary Kwasi Kwarteng. “The more cheap, clean power we generate within our own borders, the better protected we will be from volatile gas prices that are pushing up bills.

“Thanks to today’s record renewable energy auction, we have secured almost 11GW of clean, home-grown electricity – which would provide as much power as around six gas fired power stations.”

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Overall, 93 projects with existing planning permission across England, Scotland and Wales have won contracts through the competitive auction process, which is more than in all three previous CfD rounds combined. According to the government, the projects will produce enough clean energy to power around 12 million homes across the country. The government is aiming to produce 95 per cent of Great Britain’s electricity from low carbon sources by 2030, with projections for 90,000 to be supported by the offshore wind industry alone by that year.

“This fourth round shows the government’s Contracts for Difference scheme continues to be a roaring success,” said energy minister Greg Hands.

“Not only has it secured a record capacity of clean electricity, it ensures the UK will have a future powered by a resilient and diverse supply of homegrown energy by bringing forward a greater range of renewable technologies than ever before.”