UK adds $154 million to support scheme for renewable energy

UK renewable electricity projects will compete this autumn for an extra GBP95 million ($154 million) in state support, compared with the indicative budget published in July, the Department of Energy and Climate Change said Thursday.

“The funding for Contracts for Difference, which provide long-term certainty for investors, are [sic] a cornerstone of the government’s reform of the electricity markets, designed to drive investment in a new generation of clean electricity supplies,” it said. The extra funding will take the total available to GBP300 million.

Low-carbon electricity projects will compete at auction for the contracts, which will deliver new capacity much more cheaply than through the previous arrangements. It is estimated that the reforms to the electricity markets will mean that average annual household electricity bills are around GBP41 lower over the period 2014 to 2030 than decarbonizing without these changes.

 The increased budget will be split between different types of technologies. Established technologies, such as onshore wind and solar, will compete for up to GBP65 million in support, reflecting the fact that these technologies are already more competitive. Less established technologies, such as offshore wind and marine, will share in up to GBP235 million.

The projected spend of the budget remains within the Levy Control Framework, which caps the costs to consumers of government energy policies.

Energy and Climate Change Secretary Ed Davey said: “We are transforming the UK’s energy sector, dealing with a legacy of underinvestment to build a new generation of clean, secure power supplies that reduce our reliance on volatile foreign markets. Average annual investment in renewables has doubled since 2010, with a record breaking GBP8 billion worth in 2013. By making projects compete for support, we’re making sure that consumers get the best possible deal as well as a secure and clean power sector.”

The government is able to increase the CFD budget because the latest estimates of the overall costs of other policies, in particular the Renewables Obligation, are lower than expected. This will help to ensure that there is enough funding available to encourage competition in the auction. Some money has also been held back to manage the risk of overspending from other policies and for future auctions.

The government also confirmed that the Renewables Obligation will close to new large-scale solar above 5 MW from April 1, 2015. As the sector grows and becomes increasingly competitive, the government is ensuring that bill payers are seeing the benefits.

There will be a grace period to protect projects that had made significant financial commitments by May 13, when the consultation on the change began and the government will consult on an additional grace period to protect projects on track to commission before April 1, 2015, against the risk of missing the renewable obligation closure date due to delays in getting connected to the grid.

The government is also changing the way it supports rooftop-mounted solar power, in line with the Solar Strategy. This includes changes to the Feed-in Tariff Scheme.