Largest renewable energy finance program to date launched (2023)

  • The biggest round of the government's flagship renewable energy auction program kicks off £285m of annual funding for low-carbon technologies that will steer the UK away from volatile foreign fossil fuels.
  • The fourth round aims to secure more capacity than the previous three rounds, combined with additional offshore wind capacity that could generate electricity equivalent to supplying around 8 million homes.
  • Offshore wind will command £200m a year, with £24m initially allocated to floating offshore wind and £20m to tidal power projects, including solar and onshore wind for the first time since 2015.

The largest-ever round of the UK government's flagship renewable energy support scheme opens for applications today (Monday 13 December), with £285m a year available to build the next generation of projects Britain's green power company.

Renewable energy projects across the UK can now apply for financing in the fourth round of Contracts for Difference (CFDs) aimed at securing 12 GW of power capacity, more renewable capacity than the previous 3 rounds combined. The additional offshore wind capacity resulting from the grant alone could generate enough electricity to power around 8 million homes.

Compared to the previous round, it is open to an expanded set of renewable energy technologies, including, but not limited to, offshore wind, onshore wind, solar, tidal, and floating offshore wind projects, all of which are eligible for funding in the process. program auction. coming soon: this will ensure we have a safer and more resilient power system and support the UK's transition to net zero through a wider choice of power sources.

The competitive nature ofCFDsit has proven highly successful in driving the deployment of renewable energy across the UK while rapidly reducing costs. The design of the program has resulted in the price per offshore wind unit falling by around 65% between the first allocation round (AR) in 2015 and the third in 2019.

Economy and Energy Minister Kwasi Kwarteng said:

Our largest ever renewable energy auction, which opens today, will cement the UK's role as a global leader in renewable energy while supporting new future-proof industries across the country to create new jobs.

By generating more renewable energy in the UK, we can ensure greater energy self-sufficiency by moving away from volatile global fossil fuel prices while also reducing the cost of new energy.

A total budget of £285m per year has been allocated for the fourth round, with £200m available for offshore wind, £75m for new technologies such as remote island wind, tidal currents and floating offshore wind and £10m for established technologies such as solar and onshore wind.

Within new technologies, £24 million a year has been set aside for floating offshore wind projects and £20 million initially for tidal energy projects, demonstrating government support for new and innovative technologies that can make a significant contribution to UK decarbonisation commitments.

The £20 million a year support for tidal power projects represents the largest investment in tidal power in a generation and opens a new chapter for the tidal industry that could also have the benefit of creating jobs I work all over the UK.

Onshore wind and solar are competing in an allocation round for the first time since 2015, and the government is targeting significant capacity from these technologies that will help us meet the required level of deployment in line with climate change targets.

This is expected subject to the outcome of the competitive auction.AR4It will be an important step towards meeting the government's more ambitious goal of having 40 GW of offshore wind, including 1 GW of floating offshore wind, by 2030, as outlined in the ten-point plan for a green industrial revolution.

Secretary for Energy and Climate Protection Greg Hands said:

The Contracts for Difference scheme is proof that green and growth go hand in hand as it continues to be a key factor behind the world's leading renewable energy sector, providing us with safe clean energy, creating jobs across the UK and investment permits and export opportunities.

The previous 3 rounds have allowed us to drive the green industrial revolution forward, and this round will take us further and faster than ever before, while further reducing costs for consumers.

The supply chain plan process has also been strengthened.CFDsThe fourth round of can support the effective development of open and competitive supply chains and promote innovation and skills in the low carbon power generation sector.

RenewablesUnited KingdomCEODan McGrail dices:

This will be a historic auction, securing the largest amount of new renewable energy capacity yet, as ministers have listened to our calls for the full capacity cap to be removed to meet the huge appetite from companies and investors for projects in the pipeline. the United Kingdom.

More than 16 GW of wind could be competitive and more than 23 GW of total renewables. We could see investments of over £20bn in this round, creating thousands of jobs and reducing costs for energy consumers.

We need a range of renewable technologies to get to zero as quickly as possible. So it's great to see the development of innovative tidal and floating wind power projects supported by earmarked funds, as we have championed. This will allow us to accelerate the adoption of these cutting-edge technologies and create huge industrial opportunities for the future, including export.

Low carbon contractor companiesCEONeil McDermott said:

We have supported new low carbon energy projects through theCFDsprogram since its inception, so we are incredibly excited to see what the next round of awards will bring. The currentCFDsThe portfolio includes projects across the UK, including some of the world's largest offshore wind farms to date.

We have seen the impact of the program in diversifying and increasing the investment needed to support vital new low-carbon sources of energy, and we have done so this year.COP26it only served to underscore the critical timing of this round.

We have learned a lot so far and stand ready to support the ambitious infrastructure that will drive the UK's transition to net zero emissions by 2050 and protect the long-term health of our environment, economy and society.

Key points (quotes in £ at 2011/2012 prices):

Pot 1: Established technologies (including onshore wind, solar and hydro):

  • £10 million pot budget
  • 5 GW capacity cap
  • 3.5 GW capacity caps applicable to both onshore wind and solarphotovoltaic

Hype 2: Less established technologies (including floating offshore wind, tidal currents, geothermal, and wave):

  • £75 million boat budget
  • no capacity limit
  • within the £75m total, £20m of funding earmarked for tidal power projects and £24m of seed funding earmarked for floating offshore wind projects

Bombo 3: Marine Aeolian:

  • £200 million boat budget
  • no capacity limit

the last round ofCFDsProgram supports the Prime Minister'sTen point plan for a green industrial revolution, which outlines an ambitious vision of a low-carbon future for the UK and will ensure clean energy continues to play a key role in ending our contribution to climate change by 2050.

notes for editors

  • The fourth round of allocation of Contracts for Difference ends on January 14, 2022 and the final results of the auction are expected to be announced in the spring/summer of 2022.
  • Contracts for Difference are 15-year private contracts between renewable electricity producers and the Low Carbon Contracts Company (LCCC), a state-owned company that managesCFDaway from the government
  • Contracts are awarded in a series of competitive auctions known as award rounds, which are held approximately every two years. In the auction process, the lowest priced bids within each boat and/or fence win, resulting in efficiency and cost reduction.
  • CFDProvide electricity producers with more revenue certainty and stability by being less dependent on volatile wholesale prices, while protecting consumers from having to pay higher costs when electricity prices are high.
  • The program has resulted in significant new investment and has helped to significantly reduce the cost of capital for some renewable technologies.
  • CFDsAuctions (along with customCFDsContracts signed in the early days of the program) have so far awarded orders for around 13 GW of offshore wind and around 16 GW of new renewable energy capacity across all technologies across 58 projects.
  • Estimates of monetary support (boat budget) in this announcement, including the total £285m and the split between the 3 boats, are quoted at 2011/2012 prices in accordance with Control for Low Carbon Leves. These numbers are an estimate of annual support for the most expensive year in the first 4 years after implementation. Actual annual figures will vary over the life of the contract based on future wholesale electricity prices and the results of the competitive bidding process.

About the methodology behind the "Domestic Electricity" estimates:

  • The "8 million households" estimate is based on the estimated allowed offshore wind pipeline (approximately 7thGW). The actual generation secured by this allocation round will vary depending on the outcome of the competitive bidding process and given the large number of other technology projects competing in the round.
  • this was calculated using load factor estimates for offshore wind commissioning in 2025 from published dataBEIS 2020 Generation Cost Reportand publishedEstimates of average household electricity consumption
  • It is important to note that wind generation is intermittent: it is not possible to power a house continuously with the wind alone.
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