CfD Auction Design Changes Come with GBP 1.5 Billion Price Tag

Image source: BEIS

The 2017 Contracts for Difference (CfD) will cost UK consumers significantly more relative to the additional capacity secured due to the changes in the auction design which allowed small fuelled-technology projects to raise the strike price of larger projects, National Audit Office (NAO) has found.

The changes made by the UK Department for Business, Energy & Industrial Strategy (BEIS) to the 2017 auction design have resulted in a total additional cost of around GBP 1.5 billion for the consumers over the 15-year life of the contracts, a report by NAO said.

Almost all of this cost increase is due to small projects pulling up strike prices for projects that had already been accepted, rather than due to additional capacity being secured, the report stated.

In September 2017, BEIS awarded 11 CfDs to projects with a total capacity of 3.3GW, some 3.2GW of which was for three offshore wind projects.

Two of these projects, the 1,386MW Hornsea Project Two off England, and the 950MW Moray Offshore Windfarm (East), are expected to begin generating electricity in 2022-23 and will receive a strike price of GBP 57.50 per MWh. The third project, the 860MW Triton Knoll, is expected to begin generating electricity a year earlier, receiving a strike price of GBP 74.75/MWh.

The eight other CfDs in the 2017 auction were awarded to smaller fuelled-technology projects. This includes biomass with combined heat and power, and advanced conversion technology (ACT) projects.

For the 2017 auction, BEIS decided to cap the amount of generating capacity that projects using certain technologies could be awarded, and adjusted the way this cap would apply compared with the previous auction rules. These changes meant that some projects that were too large to fit within the capacity cap did not win contracts, while some projects that were smaller but more expensive per unit of electricity did win contracts, according to the report.

BEIS has made the design change on the expectation that wind projects would bid at a higher price than fuelled-technology projects, according to the report. If this had transpired, the small fuelled-technologies projects able to win contracts because of the rule changes would not have pulled up the strike price for offshore wind projects, which would have reduced, but not eliminated, additional costs.

The department has recognised that this means the outcome of the auction was suboptimal and has stated it will not apply the capacity cap rule in the same form in future auctions, NAO said.

Share this article

Follow Offshore Wind

Events>

<< May 2018 >>
MTWTFSS
30 1 2 3 4 5 6
7 8 9 10 11 12 13
14 15 16 17 18 19 20
21 22 23 24 25 26 27
28 29 30 31 1 2 3

3rd US Offshore Wind Conference & Exhibition, Boston, MA, USA

The USOW18 event is THE #1 networking hub for businesses that are looking to invest, find partners or secure contracts in US offshore wind projects…

read more >

8th New Energy Investor Summit

Finding excellent investment opportunities in wind, solar and hydroelectric power plants is difficult…

read more >

BlueWeek 2018

The seminar brings together industry, universities and research institutes active in ocean energy and aquaculture…

read more >

2nd International Conference Wind Farm Lifecycle Management 2018

Join the conference and meet industry experts from Rambøll Wind, OWI Lab, Leibniz University, Airwerk, Impax, Polenergia and many more…

read more >

Jobs>

Looking to fill a job opening?

By advertising your job here, on the homepage of OffshoreWIND.biz, you’ll reach countless professionals in the sector. For more information, click below...

apply

Looking to fill a job opening?

By advertising your job here, on the homepage of OffshoreWIND.biz, you’ll reach countless professionals in the sector. For more information, click below...

apply

O&M Engineer Structural

Here at Scottish Power Renewables we’re committed to remaining a UK leader in renewable energy. As well as investing in our technologies, we are committed to investing in the future of extraordinary people like you...

apply

Vessels>