Renewed calls for clarity on renewable subsidies

There have been renewed calls for clarity on the plan for renewables subsidies, particularly over the arrangements for upcoming contracts for difference (CfD) auctions.



Renewed calls for clarity on renewable subsidies

The government has been urged to outline how much money will be available and what technologies will be eligible for the three auctions scheduled to take place within the current parliament.

Pöyry principal consultant Andrew Kelly said the sector is unsure as to what is going to happen with the auctions. “There’ll be one this year but we don’t yet know when,” he said. “We don’t yet know what kind of budget’s really available. Beyond that we know even less.”

Speaking at an event held by the Westminster Energy, Environment and Transport Forum Kelly asked: “What is the approach to the various different pots? …How does that play out? In particular what does this mean for the less established technologies which at the moment the CfD process appears to be completely absent for?”

“This kind of forward visibility is fundamental really to ensuring that we’ve got a healthy pipeline for projects to go through,” he warned.

Kelly also called for clarity beyond the next set of auctions, saying there was still “a lot to be done” to improve the CfD process. “In particular,” he said, “…it’s really about the much longer term policy environment.”

Lark Energy renewable investment director Matthew Hicks added: “Even though we are probably staring down the barrel of a CfD auction this year, we don’t really know it’s coming.”

In March chancellor George Osborne announced in his budget that £730 million of annual funding would be made available in the three auctions planned for the current parliament. He said £290 million of that would be up for grabs in this year’s auction for less established ‘Pot 2’ technologies such as offshore wind.

Despite being asked repeatedly about the subject, head of CfD design and governance at the Department of Energy and Climate Change (Decc) Declan Burke said he couldn’t give any more details on the arrangements for the next auctions. He could only say that the Pot 2 auction would be “similar” to the one which had previously taken place.

The government has not yet decided on what will happen with the Levy Control Framework (LCF) beyond 2020/21, when the current budget comes to an end. The framework sets yearly limits on the amount which can be spent on renewables subsidies, including CfDs.

Asked whether Decc was considering adapting the LCF to take account of the impact of changes in wholesale prices on CfD payments, or whether it was looking at publishing further details of how the budget is calculated to give investors more foresight, Burke said there were currently “no plans” to do either. 

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Renewed calls for clarity on renewable subsidies
BDC July 2022 issue - 294

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