Taking into account impact of global events on supply chains, the UK government has raised the maximum price for various renewable energy technologies in its next Contracts for Difference (CfD) auction, Allocation Round 6 (AR6) to be held in 2024.
For solar PV, it is a 30% increase from £47 ($58)/MWh as the lowest winning bid in Allocation Round 5 (AR5) to £61 ($76)/MWh. It has made the solar industry quite happy.
"Solar remains the cheapest source of power in the UK, according to the government's own figures, although lately installation costs have been affected by factors outside the control of the industry, notably the war in Ukraine," said Chief Executive of Solar Energy UK, Chris Hewett. "So it is gratifying that that the maximum bid price has been raised by a significant amount, which should bolster growth further towards reaching the capacity target of 70GW by 2035."
However, it is offshore wind that gets the maximum raise of 66%—from £44 ($54.6)/MWh to £73 ($90.6)/MWh as the government targets this technology to deliver 50 GW cumulative capacity by 2030. There were no bids for offshore wind in AR5 for CfD funding for which the government had blamed the global rise in inflation and impact on supply chains (see Solar Wins Big In UK's Allocation Round 5).
The government plans to give a separate funding pot to offshore wind to enable a high number of projects to participate which it says will ensure a healthy competition among them.
Among other technologies, floating offshore wind projects will see their strike prices go up 52% from £116 ($144)/MWh to £176 ($218)/MWh. Strike prices for geothermal have been raised by 32% and for tidal energy by 29%.
"Today we have started the process of our latest Contracts for Difference auction for renewables, opening in March next year. We recognize that there have been global challenges in this sector and our new annual auction allows us to reflect this," stated Energy Security Secretary Claire Coutinho. "This is a vital part of our plan to have enough homegrown clean energy, bringing bills down for families and strengthening our energy independence."
Under the 5 allocation rounds conducted for CfD funding, the UK has awarded around 30 GW of new renewable energy capacity since 2014. The new strike prices will ensure projects are sustainably priced and economically viable to compete in the next round, it added.