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The UK Department for Energy Security and Net Zero Emissions (DESNZ) has said it plans to reform its renewable energy generation scheme to incentivise applicants that include factors other than price, a move welcomed by the UK PV industry association, according to foreign media reports.
The announcement follows a review of the Contracts for Difference (CfD) scheme, which is due to start in December 2022. The CfD scheme and its predecessor, the FIDER scheme, which supports low carbon electricity projects, has so far awarded contracts for renewable energy projects with a total installed capacity of 26.1GW.
In December 2022, the UK Department for Energy Security and Net Zero Emissions (BEIS), the predecessor of the UK Department for Business, Energy and Industrial Strategy (BEIS), launched a consultation on the standard terms and conditions of the CFD scheme and changes to the dedicated network agreement (AR5) for the fifth round of allocations.
Applications for the fifth round of CFD allocations were opened in March 2023. However, the budget allocation for the latest round has fallen to £205 million, which has been criticised by the UK Renewable Energy Trade Association. Michael Chesser, the organisation’s economics and marketing manager, said, “The budget and parameters set for this year’s CFD auction are currently too low and the timescale too tight to unlock all the potential investment in wind, photovoltaic and tidal energy projects that the renewables sector could offer.”
The UK government is currently seeking evidence to determine whether CFDs should be awarded not only on the basis of price, but also on the extent to which renewable energy projects contribute to the overall health of the renewable energy sector.
CFDs will be awarded taking into account “non-price factors” such as supply chain sustainability, skills training, innovation, and grid flexibility and operability. This announcement shows that the UK government is taking the issue of skills shortages and import-dependent supply chains more seriously.
Graham Stuart, UK Secretary of State for Energy Security and Net Zero Emissions, said that while CFDs have been a success, there is still a need to maximise the potential of the scheme to improve energy security and ensure that renewable energy developers are able to make the necessary investments in supply chains and innovation.
The UK Department for Energy Security and Net Zero Emissions said the announcement follows recommendations made in a net zero assessment by UK MP Chris Skidmore and a report by offshore wind developer Tim Pick earlier this month.
Chris Hewet, chief executive of Solar Energy UK, said, “CFDs have played an important role in driving the installation of 15GW of PV systems in the UK. However we recognise that there is room for improvement beyond seeking the lowest bidder.
In our review submission, we said that more could be done to ensure a stronger UK supply chain is built and that UK government departments must ensure the workforce has the right skills for a zero emissions world. Last year we launched the ‘PV Management Initiative’ with SolarPower Europe to improve the sustainability of the supply chain. As such, the proposed reforms now appear to be in line with our own objectives.”