The Department of Energy and Climate Change (DECC) has announced an extra £300 million for all low-carbon technologies, supported under the Contracts for Difference (CfD) mechanism, an increase of £95 million from the initial budget announced in July.
Established technologies, such as onshore wind, will now compete for £65 million in annual support, up from £50 million, while less established technologies, including offshore wind and marine energy will share £235m, up from the initial £155m.
The increase in the less established pot means that 700-800 megawatts of clean energy will be installed under the new budget – a boost of 200MW on the previous announcement. However, this will not necessarily be reflected in potential new capacity as DECC has also announced a reduction in the crucial ‘reference price’, their estimate of how much electricity will cost per megawatt hour between 2015 and 2021. When this cut of about £10 per MWh is taken into account, it wipes out much of what has been gained with the increased funding.
“Today’s news is a curate’s egg” said RenewableUK Director of Policy Gordon Edge. “Of course the extra funding is welcome as it will help us to install much-needed extra capacity – it’s always good to see DECC putting their money where their mouth when it comes to supporting clean energy. But there’s a sting in the tail. The reduction in the all-important reference price of electricity means that the extra budget doesn’t go as far, so when you weigh the good news of the extra funding against the bad news on the reference price, offshore wind developers will end up only slightly better off and onshore wind developers end up in about the same place as they were under the original budget. It just goes to show that when announcements like this are made, it’s always worth reading the small print carefully to get the full picture.”
The government’s Contracts for Difference scheme provides support for low-carbon projects by giving investors certainty on future returns while the ‘reference price’ is a measure of the average market price for electricity in Great Britain. Under the CfD system, generators under contracts are paid the difference between the reference price and the ‘strike price’, which is a set price for electricity.
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