A National Audit Office (NAO) report concedes that the Final Investment Decision Enabling (FIDE) programme succeeded in keeping the UK renewables sector rolling and preventing a hiatus ahead of the switch to its new contract-for-difference (CfD) based support regime.
But it may have sacrificed value for money by acting too soon and without the competitive edge that the full CfD process brings, the NAO claims.
FIDE contracts went to five offshore wind projects – 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.
Three biomass projects also got FIDE deals from the Department of Energy and Climate Change (DECC), which hailed the mechanism as a key plank of the UK’s decarbonisation agenda.
But the NAO report said: “[DECC] proceeded with the FIDE scheme...despite acknowledging that competitive pricing might reveal subsequently that its administratively-set strike prices in some cases were too high.
“It is not clear that the full scale of these commitments was needed so soon to meet the UK’s 2020 renewable energy target. The early contracts have committed 58% of the funds available for renewables CfDs to 2020-21.”
It concluded: “The investments supported should contribute towards the UK’s achieving its renewable energy target in 2020, but it is not clear that awarding fewer early contracts would have put the achievement of that target at risk.
“As the CfD regime has the potential to secure better value for consumers through price competition, committing so much of the available funding through early contracts, without competition, has limited the department’s opportunity to secure better value for money.”
DECC’s officials now face a grilling in front of the UK House of Commons’ Committee of Public Accounts, whose chair Margaret Hodge MP was scathing after the report.
Hodge claimed the department had limited its options for future investment rounds – “yet between them these projects will generate just 5% of the renewable electricity required”.
Hodge said: “I am also frustrated that, despite the huge consumer subsidy that has gone into supporting these projects, the Department has failed to put in place any arrangements to recoup consumers’ money if providers make bigger-than-expected profits from these projects.”
DECC defended its approach. “The Government has been dealing with a legacy of under-investment and neglect in our energy system, meaning we’ve needed to drive through reforms to secure investment in new generation to keep the lights on in the years and decades ahead while decarbonising our electricity supplies, and getting the best possible deal for consumers,” a spokesman said.
“As the NAO’s report recognises, these early contracts are designed to offer better value to billpayers than the previous system and have reassured those we need to invest in our energy security. Without that investment, projects would have been unable to go ahead or been significantly delayed – putting our future energy security at risk.”