Government moves to shore up clean energy contract regime, as new wave of renewables projects progresses

The UK's renewables sector received a dual boost this week, as the government beefed up its plans to ensure the UK's clean energy contract regime can adjust to the falling power demand that has resulted from the coronavirus crisis and a number of leading wind energy developers confirmed they are moving forward with new projects.

The Department for Business Energy and Industrial Strategy (BEIS) yesterday launched a consultation on proposals to defer until next year part of the planned increase in electricity suppliers' obligations that would otherwise be collected by the Low Carbon Contracts Company (LCCC) that manages the UK's Contracts for Difference (CfD).

The move follows the government's recent confirmation it will provide a one-off loan to LCCC to ensure it can continue to pay clean power generators who hold CfDs without needing to increase levies on power suppliers at short notice.

"The Low Carbon Contracts Company (LCCC) advised BEIS that as a result of lower electricity demand, resulting from measures introduced to reduce the spread of COVID-19, and higher payments to CfD generators because of lower wholesale electricity prices, electricity suppliers would have faced an unexpected increase in their obligations for the second quarter of 2020," the consultation states.

"Therefore, in line with the Government's efforts to support the economy in the light of the COVID-19 national emergency, the Government announced on 24 April 2020 that it would provide a one-off loan to LCCC so that it can continue to pay generators without needing to increase the Interim Levy Rate at short notice."

The consultation - which will run for an unusually short period and will close on May 19th - proposes augmenting the loan to further ease financial pressure on energy companies by deferring part of the amount of the increase in suppliers' obligations that would otherwise be collected by LCCC for the current quarter of 2020 to the first quarter of 2021.

The government stressed these are temporary measures in response to "the truly exceptional circumstances of COVID-19" and that it is "committed to upholding the self-financing nature of levies in the energy system".

The sharp fall in energy demand and falling wholesale power prices has had a knock on impact on the CfD regime, which provides clean power generators with a guaranteed price for the power they provide. Lower demand has resulted in renewables providing an increased share of the UK's grid mix, while the fall in wholesale prices means the top up payment provided by LCCC has increased.

The latest developments comes as further evidence emerged to suggest the UK's long term renewables plans will not be derailed by the coronavirus crisis.

The grid has proven remarkably resilient even as renewables share of the grid has soared to record levels. Meanwhile, leading developers are continuing to progress plans for a new wave of projects that the government hopes can play a central role in the UK's economic recovery.

Today the developers behind the giant Dogger Bank offshore wind farm - Equinor and SSE Renewables - announced plans to build a new Operations and Maintenance (O&M) Base for the project at the Port of Tyne.

As operator for the operations phase of the 1.2GW wind farm, Equinor is to construct the new O&M base and use it to operate the wind farm for its expected life of more than 25 years.

Located more than 130km from the North East coast of England, when fully operational the project is expected to provide enough renewable electricity for over 4.5 million UK homes.

The flagship project is expected to generate over 200 direct jobs in the region, as well as opportunities for companies at all levels of the supply chain. Overall, the Dogger Bank Wind Farm is estimated to trigger a total capital investment of approximately £9bn between 2020 and 2026.

The new plans were welcomed by Business Secretary Alok Sharma who hailed the facility as "fantastic news for Tyneside and the North East of England".

"Renewable energy is one of the UK's great success stories, providing over a third of our electricity and thousands of jobs," he said. "Projects like Dogger Bank will be a key part of ensuring a green and resilient economic recovery as well as reaching our target of net zero emissions by 2050."

Stephen Bull, Senior Vice President for Equinor's North Sea New Energy Solutions, and Chair of Renewable UK, said the project highlighted how offshore wind was both supporting the UK's net zero goal and helping to drive investment that can aid the country's economic recovery.

"The UK government has legislated to cut carbon emissions to net zero by 2050," he said. "Major scale renewable energy projects like Dogger Bank ensures Britain's leadership as the number one offshore wind nation. Moreover, the project brings new investment to the UK, at a challenging time for us all, and secures over 200 jobs in the region as well as new opportunities in a future-fit growth sector."

Meanwhile, the Guardian reported today that Scottish Power is working on plans to 'repower' Scotland's oldest commercial wind farm as part of a £150m scheme to develop a clean energy cluster in central Scotland capable of supplying 100,000 homes with clean power.

The company intends to upgrade the Hagshaw Hill wind farm, alongside plans to purchase two nearby development projects to deliver 220MW of capacity in South Lanarkshire.

The projects are expected to create up to 600 construction jobs and 280 long-term jobs.

"We're kickstarting as many of our projects as we can so they are ready to help boost the economy when the pandemic ends," Keith Anderson, CEO at Scottish Power, told the Guardian. "Not only do these projects help funnel money back through the supply chain and into jobs but they also make sure that the economic recovery is based on sustainable investments."

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• Topics
• Energy
• Solar
• Wind
• Department for Business Energy and Industrial Strategy
• Low Carbon Contracts Company
• CfD
• Contract for Difference
• BEIS