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Legal sword over UK renewables auction as bid window shuts

IN DEPTH | Sealed bids in for CfD round that still faces unresolved legal challenge over onshore wind

Developers were warned they could still face months of uncertainty, as bid-submission finally closed on a UK renewables auction process rocked by eleventh-hour legal action that was condemned by one major offshore wind player as “surprising and disappointing”.

The bidding window for the third Contracts for Difference (CfD) auction shut on Thursday, two weeks later than originally scheduled after UK developer Banks Renewables sought permission to launch a judicial review challenging the legality of exclusion of most onshore wind projects from the process.

A spokesman for the Durham-based onshore wind developer said it is still waiting for an initial hearing to be scheduled, when a judge will decide if it can launch a full-scale court challenge.

One leading UK wind developer told Recharge it was “unhappy and surprised at the last-minute legal challenge” which risks derailing the tight timetable for several major offshore projects. “If legal action does cause a lengthy delay, then we could end up having to foot the bill,” said an executive at the company speaking on condition of anonymity.

Mike Blanch, associate director of specialist industry consultancy BVG Associates, said “the technologies BEIS [Department of Business, Energy and Industrial Strategy] announced as eligible for the auction have been known about for a considerable time, so the timing of any judicial review was surprising coming so late in the process with the auction well underway and results expected within weeks”.

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In reaction to Banks’ legal moves in mid-August, National Grid, which runs the auction for BEIS, extended the bidding window by two weeks from 15 August, with the final notification of the results currently expected on 19-20 September.

Market analysts warned companies taking part that should a judge grant permission for a full judicial review it will likely take months for a hearing to be scheduled, with unpredictable implications for the outcome of the auction if Banks is ultimately successful.

“The key thing is that developers were given a period of two weeks to take legal advice. It is BEIS’s intention to continue running the auction as per the new timetable announced earlier this month. However, it is possible any hearing may not appear until after the final auction results announcement,” Blanch told Recharge.

Stephen Hill, a partner at legal firm Eversheds Sutherland, told Recharge: “Inevitably, when there is a judicial review process, then there is a degree of uncertainty surrounding the process. The renewables industry has successfully brought judicial review claims against the government in the past. However, in those circumstances, the industry was broadly aligned in their views and had a common purpose.”

"It is currently unclear what the implications would be. What is certain, is that there would be a delay in deployment."

Hill added: “Whilst very limited details have been provided, the judicial review process here involves one sub-sector on the renewables industry (onshore wind). Whilst we think that developers and sponsors will continue with their discussions with BEIS and the LCCC [Low Carbon Contracts Company], the real loss will be the pause in discussions around securing of funding, as well as the necessary increased and prolonged negotiations around the consequences of signing up to a contact whilst the threat of JR hangs over the Applicants.

“It should be noted that BEIS have stated that it has acted lawfully but if the courts found otherwise, it is currently unclear what the implications would be. What is certain, is that there would be a delay in the deployment for all technologies,” said Hill.

New onshore wind projects were allowed to compete in the UK’s first CfD tender in 2015, but together with solar were excluded from the second auction in 2017 reflecting a harder line by the governing Conservative Party.

As a result the number of new UK onshore wind installations plummeted by nearly 80% in 2018 to less than 600MW – their lowest level since 2011, according to figures from industry body RenewableUK.

Recently-appointed UK energy secretary Andrea Leadsom – a high-profile critic of onshore wind during a previous spell as energy minister in 2015/2016 during which she helped steer through legislation taking onshore out of the CfD mechanism – has shown no sign of a change of mind.

Banks argues that excluding consented onshore wind from the CfD mechanism is “against the public interest, prevents consumers from benefiting from the lower energy prices that would result from their inclusion and, from a legal perspective, does not comply with either EU or UK law”.

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The developer is unhappy that two Scottish onshore projects with a combined capacity of 150MW and permits in place were not allowed to compete in the third CfD auction.

BVG’s Blanch said: “My feeling is that with the big fall in the cost of offshore wind over the last few years that these days there is a much bigger overlap in project costs between offshore and onshore wind.

“However, we also have to consider the wider energy picture. If we want to get to net zero emissions by 2050 then we will need a lot more clean generation of all sorts, including onshore wind.

“There is a very clear and persuasive argument being made by the industry for the inclusion of onshore wind in the CfD process, and cross-party political support for this has been building steadily, with a letter sent to the Prime Minister this month.”

BEIS is seeking up to 6GW of capacity at the auction, with offshore wind expected to dominate.

The offshore wind CfD administrative strike prices have been set at £56/MWh for 2023/2024 and £53/MWh for 2024/2025 delivery. Remote island onshore wind – the only land-based turbines eligible to take part – has been set at £82/MWh for both delivery years.

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