Consultation proposes extending support offered for low carbon electricity projects via Contracts for Difference scheme by a further four years
Energy sector stakeholders are being given an additional week to have their say on sweeping proposed changes to the UK's flagship clean power contracts scheme, with the government having pushed back the consultation deadline to take account of disruption wrought by the coronavirus.
The government has since March been seeking views on a raft of sweeping changes that would allow onshore wind and solar projects to compete for clean power contracts known as Contracts for Difference (CfD) at auction next year, in addition to potentially unlocking support for battery storage, grid technologes and floating wind projects.
In an announcement late last week the Department for Business, Energy, and Industrial Strategy extended the consultation deadline by a further week in light of the disruption caused by the coronavirus crisis. The consultation will now close on 29 May to allow for more time for responses in the wake of the Covid-19 outbreak.
As part of the consultation, the government is proposing to extend the CfD scheme delivery years by a further four years "to support the level of ambition needed to meet the 2050 net zero target".
The government currently plans to hold the next allocation round for low carbon power contracts in 2021, and then stage subsequent rounds every two years for projects set for commissioning until the current final delivery year ending in March 2026. The new proposals would see the final auction round shifted to allow for 'delivery years' right through to 2030.
"To enable the government to undertake allocation rounds for projects commissioning after 31 March 2026 and provide investors with certainty over our long-term delivery plans, an amendment to the Allocation Regulations is necessary," the consultation states. "We therefore propose to extend 'delivery years' to cover the period up to 31 March 2030. If we do not make this amendment, we would be unable to run allocation rounds for delivery years after 31st March 2026."
The CfD scheme is the government's main mechanism for supporting new, low carbon electricity generation projects in the UK, and has to date awarded contracts to around 16GW of new renewable power capacity.
The proposed changes to the CfD scheme set out in the consultation, which were first outlined in March, are aimed at providing a clearer route to market for a wider range of technologies, including low cost onshore wind and solar projects; offshore wind farms that have to date been the main beneficiaries of the scheme; and earlier stage technologies such as battery storage and marine energy.
The consultation document also states that higher levels of wind power capacity are needed to meet the UK's 2050 net zero goal, and the government is therefore looking to provide support for floating wind projects.
"In order to support this, the government is considering how best to facilitate the acceleration of floating offshore wind projects to commercial deployment and harness the potential benefits it offers for the UK if costs can be brought down to a level competitive with other cost effective renewables," it states. "We are proposing that floating offshore wind is classified as a separate technology with a distinct administrative strike price, so that projects may compete in future auctions for ‘less established' technologies."
Elsewhere in the consultation, the government is proposing to exclude new conversions of coal plants to run on biomass energy from future allocation rounds for the scheme, arguing that it views such projects as a "transition" technology rather than part of its long-term strategy.
It follows the extension of a separate consultation last week over plans 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), which manages the CfD scheme. The changes are designed to ease financial pressure on energy suppliers at a time when demand has fallen sharply and would entail the government providing a one-off loan to the LCCC.
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