RenewableUK, Energy UK and Scottish Renewables have written a joint letter urging the UK Government to reform annual clean power auctions.
The joint letter to the Secretary of State for Energy Security and Net Zero Grant Shapps want to see “urgent changes” to Contracts for Difference (CfD).
The trade bodies have put forward a series of recommendations to lower energy bills by maximising private investment in renewable technologies, while also creating tens of thousands of high-quality well-paid jobs.
In the letter, the trade bodies stated: “Jointly we believe that a broader approach is needed in defining how best value is delivered from Allocation Round 5 (AR5) onwards for the industry and consumer.”
The letter goes onto add: “The race to the bottom on strike prices incentivised by the current auction process is at odds with the reality of project costs and investment needs, jeopardising deployment targets.
“CfD strike prices are no longer cost reflective and, consequently, the industry’s capacity to invest in critical infrastructure and domestic supply chain is being eroded.”
The trade associations pointed out that the US and the EU have stepped up their ambitions for renewable energy significantly, offering financial incentives and supportive regulations to developers and supply chain companies.
The letter puts forward a series of recommendations to address these issues.
These include reassessing and uplifting the budget for this summer’s auction (AR5).
Since it was announced in March, a number of new projects have become eligible to bid.
The budget for fixed-foundation offshore wind alone would need to be at least two and a half times higher than its current level to maximise the capacity which could now be secured in this year’s auction.
It also suggests that fixed-foundation offshore wind should be put back into a separate budget pot to maximise deployment.
The second measure focusses on the need to support emerging technologies such as floating wind and tidal stream projects, to accelerate cost reductions and build up supply chains.
This could be achieved by setting clear deployment targets and ringfencing budgets for each technology, to ensure that each secures a minimum amount of new capacity.
The third recommendation urges Ministers to ensure that in future auction rounds, CfD parameters should reflect their economic environment more closely in terms of supply chain costs and interest rates.
A clear schedule with auction parameters, budgets and capacity targets would provide a clear roadmap towards net zero.
The trade associations conclude that the definition of the value of CfDs to consumers should be fundamentally reframed to reflect the UK’s net zero targets and to maximise the amount of renewable capacity which could be delivered at a lower cost than new gas projects.