Earlier this week, the UK Government confirmed that up to £265 million will be provided each year for the next Contracts for Difference (CfD) – Allocation Round 4 – a record amount of money geared towards low carbon electricity projects, including offshore wind, solar and tidal technologies. The aim of this significant investment is to support businesses across the UK, whether in development or supply chain and services roles, and is intended as a strategic boost for the UK target of 40GW of renewables technologies by 2030.
Highlights include £200 million allocated to offshore wind and £24 million ringfenced for floating offshore wind projects and for the first time £10 million for established technologies including onshore wind, hydro and solar.
In the draft allocation framework set out by BEIS, the £265 million annual budget is split into 3 ‘pots’:
Pot 1: Established technologies – £10 million to cover Onshore wind (>5MW), Solar (>5MW), Energy from Waste, Hydropower (5-50MW), Landfill Gas and Sewage Gas; there are capacity caps imposed of 3.5GW on onshore wind and on solar PV developments and a global cap of 5GW across this pot.
Pot 2: Less-established technologies – £55 million to include Floating Offshore Wind (ringfenced £24 million available), Geothermal, Remote Island Wind (>5MW), Tidal Stream and Wave. There is no capacity cap across this pot.
Pot 3: Offshore wind – £200 million with no capacity cap.
The previous CfD round enabled enough green energy to power over 7 million homes across the UK at record-low prices. The 2021 scheme, which is due to open in December, aims to assist with the nation’s net-zero emissions target for 2050.
The Energy Minister Anne-Marie Trevelyan commented that the 2021 scheme “will support the next generation of renewable electricity projects needed to power our homes and meet our world-leading climate change targets.”
You can view the draft CfD budget notice here: Contracts for Difference (CfD) Allocation Round 4: Draft budget notice – GOV.UK (www.gov.uk). A final budget notice will be confirmed shortly before the December launch of Allocation Round 4.
The UK CfD rounds released every two years from 2015 is reputed to be the most efficient scheme to protect consumers, while encouraging cost effective development of renewables. They offer developers and their funders a 15-year contract set at a strike price that enables funding commitments to be made.
If you have any questions about the scheme and its ambitions, please get in touch.