EC clears UK renewable CfDs

The European Commission said the UK's incoming contracts-for-difference (CfD) support scheme for renewable energy meets EU state aid rules, and also approved initial CfDs for five offshore wind farms.

EC competition chief Joaquín Almunia said CfDs – the cornerstone of the UK government’s Electricity Market Reform (EMR) agenda – represent “afine example of how to promote the decarbonisation of the economy with market-based support mechanisms, at the lowest possible cost for consumers".

The verdict will come as a relief to UK policymakers and renewables developers alike, as there had been concerns that the whole approach could be ruled out of line with EU regulations.

However, Brussels today gave its blessing to the use of CfDs to promote renewables. It noted that the UK had pledged to move to competitive awards for support for “established” generators such as onshore wind and PV, with “less-established” technologies including offshore wind also facing “competitive auctions with some degree of cross-technology competition” after an initial period under allocated budgets.

One big stumbling block threatened to be the issue of CfD support for new-build nuclear in the UK, but this is not addressed by the EC in its verdict on renewables and appears to have been kept separate.

The EC said the renewable CfDs and their associated strike prices – designed to give generators long-term reassurance on returns while also protecting consumers – will be financed through a tax on energy suppliers.

Its statement said: “To ensure that the tax does not discriminate overseas generators, imported renewable electricity will not be subject to the tax. In the long run overseas generators will be allowed to compete for CfDs on the same terms as national generators.”

The EC added: “The scheme is in line with the objective to promote renewable energy while avoiding overcompensation and without unduly distorting the internal energy market, given in particular the competitive and non-discriminatory procedures to allocate the aid.”

Brussels also gave specific approval to early CfDs for five offshore wind projects.

They are Dong Energy’s 1.2GW Hornsea 1,660MW Walney Extension, and 258MW Burbo Bank Extension projects; SSE/Repsol’s 664MW Beatrice wind farm in the Outer Moray Firth; and Statoil/Statkraft’s 402MW Dudgeon project off the Norfolk coast.

UK energy secretary Ed Davey said: “This is great news, and shows that our major reforms to the electricity markets are urgent and needed to turn around the historic neglect of the sector.”