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UK government leaves door open on more regular renewables auctions

Developers dodged more onerous supply-chain and carbon-footprint commitments in the results of a recent consultation exercise announced by BEIS but appear set to lose all Contracts for Difference top-up payments during periods of negative electricity prices.

The U.K. government has said it will keep an open mind on a request from the renewables industry to hold its biennial clean energy auctions more often, as it confirmed the Contracts for Difference (CfD) incentives regime would be extended to 2035.

Having announced its intent to double the volume of clean energy capacity procured in the next CfD auction round – planned for “late” 2021 – to 12 GW, the U.K.’s Department for Business, Energy and Industrial Strategy (BEIS) yesterday said: “The possibility of more frequent auctions will be kept under review for future rounds.”

The statement was made as BEIS revealed the results of an extended consultation exercise into proposed changes to the CfD system, which sees generators bid a strike price they will accept for the electricity they generate. Any shortfall between the day-ahead wholesale electricity price and the CfD strike price agreed is made good by the government with the generator paying the difference when the wholesale price is higher than their strike price.

Supply chains

While the call for more regular auctions was put aside, for now, and a suggestion from the U.K. solar lobby to hold PV-only incentive auctions also fell on deaf ears, clean energy developers swerved potentially more demanding requirements to set up local supply chains. The stay of execution on those proposals may also prove temporary, however, with BEIS immediately opening a fresh consultation to re-examine the issue. That second exercise will run until January 18.

The present system exempts renewables facilities with a generation capacity of less than 300 MW having to formulate a local supply chain plan and a proposal to bring down the threshold will not be implemented in the next CfD auction – no doubt to the relief of the solar industry – although BEIS warned: “The government will keep the issue under review for future allocation rounds.”

Similarly, views on how renewables generators should account for the carbon footprint of their supply chains will not result in any immediate change to the incentive program, with the caveat the government will “consider how we can start to embed sustainability considerations into the SCP [supply chain plan] process where appropriate.”

Bonds

A suggestion bonds – perhaps of £10,000 (€11,200) per megawatt of generation capacity – might be introduced to avoid the non-delivery of projects with signed 15-year CfD agreements, was also sidestepped for the time being, with BEIS promising to “carry out further work on how bonds might effectively and fairly be applied.”

The government does appear set, however, on removing the six hours’ worth of top-up ‘difference payments’ renewables generators are entitled to during periods of negative electricity prices. The current regime continues payments during negative price periods lasting less than six hours but that safety net is part of the separate CfD consultation opened yesterday, with the government signaling its intent to halt all payments during negative price spells.

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The consultation results confirmed coal-to-biomass facilities, which involve the burning of wood pellets, will not be eligible for next year’s CfD auction or future rounds, and also separated offshore wind into a separate technology ‘pot’.

Questions about whether and how to incentivize energy storage as part of the CfD regime generated an inconclusive response with the government stating further work needed to be done to determine whether it would be best to encourage generators to co-locate storage facilities or whether such technology should be planned “at an overall system level.”

Next year’s auction will readmit solar to the program after a five-year absence and PV will compete in a mature technologies section alongside energy-from-waste with combined heat and power; hydropower; landfill gas; and sewage gas. Three technology pots will compete in 2021, with a less-mature-technology section completing the line-up.

Response

U.K. trade body the Solar Trade Association (STA) welcomed the extension of the CfD regime to 2035 but called for confirmation solar would continue to be eligible after next year and pointed out several other respondents to the consultation exercise had echoed its call to conduct tenders more frequently.

STA chief executive Chris Hewett said, in a press release issued by the trade group: “Many responses, including our own, highlighted the merit of having more frequent auctions, and this is something that the government must implement if it is to maximize the economic and climate potential of renewables. Large solar projects can be deployed rapidly, offering a swift, job-intensive contribution to a green economic recovery.”

BEIS said the previous round of the CfD program, held last year, drove 5.8 GW of renewables capacity to take the cumulative effect of the regime to 15.5 GW, including coal-to-biomass projects.

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Source: pv magazine