Next Wednesday’s Budget could set out expenditure available for future allocation rounds of DECC’s Contracts for Difference regime, according to industry sources.
Last November, Energy Secretary Amber Rudd outlined plans to support up to 10GW of new offshore wind capacity from three CfD auctions. The first auction, to be held this year, is focused on “less established” technologies – offshore wind and remote island onshore wind.
Sources said the government could make an announcement about the timings and the budget allocated for this year’s allocation round.
“We expect to see announcements on the Levy Control Framework or at least the amount of expenditure available under future allocation rounds for CfDs, with a focus on the next couple of rounds,” a source said.
“On the LCF, there might be some visibility on what they will expect to spend from 2021/22 out to the mid-2020s.”
RenewableUK said the Budget provides a “golden opportunity” for the government to provide clarity on the details of the next CfD auction and give assurances of future rounds to help the offshore wind industry drive down costs.
“To engender full confidence, this needs to be accompanied by both a robust and detailed methodology showing how the Treasury has arrived at its figures, and a reform of LCF accounting so that the ‘buying power’ of the budget is not so sensitive to wholesale price movement,” said RUK deputy chief executive Maf Smith.
The Treasury could also announce the level of the Carbon Price Floor, which has been frozen at £18/tonne until 2019/20, into the next decade. A continuing freeze is seen as the most likely outcome.
There will also be an update by the Office of Budget Responsibility on any overspend of the LCF.
Rumours that the Treasury could unveil proposals for a market stabilising CfD on Wednesday appear wide of the mark, the source said.
“I’d be very surprised if there was a firm commitment to market stabilising CfDs in the Budget, it’s unlikely that a policy statement would be unveiled at this time. DECC hasn’t yet decided how or, indeed, if it will bring forward a market stabilising CfD.”
For full coverage of next week’s Budget read the 17 March edition of subscriber-only newsletter reNEWS.
Image: George Osborne (HM Treasury)
