RUK warns of CfD 'lean times'

Developers face a “lean time” as they battle for a share of the UK’s first allocation for contracts-for-difference (CfD) support, warned industry body RenewableUK – with offshore wind facing the prospect of just one successful project in the round.

RenewableUK policy director Gordon Edge claims the implications of a draft budget released yesterday would leave developers “hurt” as they find they “have paid handsomely to get to the point of application for CfD by securing consent and a grid find that all that has bought them is a lottery ticket and a low chance of success”.

The UK Department of Energy and Climate Change (DECC) yesterday set out draft plans to award CfDs totalling £205m ($349m) annually for projects coming onstream between 2016/17 and 2020/21.

Of that, £55m will go to “established technologies” including onshore wind and large-scale PV, and £155m to “less-established” generators such as offshore wind.

In his blog on the RenewableUK website, Edge said a range of factors had led DECC to adopt a highly cautious initial allocation. Unknowns include how much capacity will be brought forward under the Renewables Obligation – the UK’s outgoing support scheme – before it closes for new entrants in 2017.

Edge says: “Our sector looks to be going through a very lean time as a result.”

Edge estimates that the whole £50m allocated to DECC’s “established” pot could bring forward 534MW in 2015/16 or 736MW in 2018/19.

He adds: "As in reality the capacity would be spread out across these years, the amount possible at the administered strike prices would be between these figures. If competition drives strike prices lower, then the capacity would be higher. So we are looking at perhaps 600-900MW of onshore wind projects supported by CfDs.”

The position for offshore wind “looks even more restricted”, according to the RenewableUK policy chief.

Edge says around 500-600MW of capacity can be brought forward with a £155m budget. He writes: "This is barely enough for the smaller projects being brought forward now, and not enough for many of the initial Round Three projects. Consequently it looks like only a single project can gain a contract in this round.”

According to Edge, what visibility there is for the 2015 allocation round and beyond is not hugely encouraging.

He writes: “The increases beyond this are not so large as to lead us to think there will be a step change in budget for the less-established pot in future rounds. There will be fierce competition amongst the many offshore projects coming forward if that situation does not change.”

RenewableUK said it would lobby the present and future governments to attempt to expand the budget available “to allow roll-out of both the most affordable renewables and those that promise the most economic benefit for the UK”.

The government said yesterday that five offshore wind projects have already been supported by early CfDs, over and above the support on offer in the first round.

The UK’s Solar Trade Association yesterday branded the draft allocation “absurd” and accused the government of backing wind over solar.