Capacity Market ‘should accept wind and solar bundles’

The Capacity Market should be tweaked to make it more attractive for wind and solar projects from different parts of the country to be bundled up into the same contracts, a consultant has proposed.

Hannah Staab, principal advisor at multinational clean energy consultancy Natural Power, told Westminster Forum’s renewable energy conference yesterday (14 January) that putting these different assets into the same Capacity Market contract would get around the problems raised by the inherently intermittent nature of both power sources.

Assembling portfolios of solar and windfarms, located in different parts of the country, gives those holding such Capacity Market contracts a better chance of providing power when it is needed.

However while different assets can be placed into the same contract, these generation units are still ‘de-rated’ individually. This means the assessment of how reliably they can supply power does not take into account the broader benefits of having a portfolio of assets.

“Research shows that opposite sides of the UK may have the same wind speed trends on a seasonal and annual basis but can behave very differently day by day or hour by hour,” she said, adding that wind and solar power are often negatively correlated.

“The way the Capacity Market is designed doesn’t allow for the direct benefits from bundling projects together in this way.

“This could provide a route to market for projects that otherwise don’t have long term project revenues,” Staab said, adding that she it could provide an alternative to Contract for Difference (CfD) auctions, which both onshore solar and wind are currently barred from participating in.

But, she said that, given that projects like wind and solar have a typically 30 to 40-year lifespan, there is “not much time to waste” to align the regulatory framework with the UK’s 2050 net zero goal.

David Bird, senior investment manager at Octopus Renewables, urged the government to rapidly reverse the exclusion of onshore solar and wind from the CfD process.

“We need a lot more detail on the policy and we need it quickly to ensure we are not putting it (money) to work in the wrong place.”

He said that from an investor’s perspective, the “worst thing” would be to put money into a currently unsubsidised technology only for the government to reverse its stance by allowing onshore solar and wind projects to compete for CfD contracts.

“The earlier the market can get clarity on that and the quicker it can happen, once it is talked about, the better,” Bird said.

Any delay in implementing a reversal of the current CfD block could spark a “hiatus” in investment, he said: “Nobody will build anything because they will wait for the juicier premium they get under the CfD.”

Rebecca Williams, head of policy and regulation at RenewableUK, told the same conference that modelling carried out by the trade body shows that relying on the market will deliver a maximum of 18GW of onshore wind power by 2030.

By contrast, she said, allowing onshore wind back into the CfD regime would bring forward 40GW of onshore enabling the UK to outstrip the CCC’s targets.

The Committee on Climate Change has estimated that 35GW additional onshore wind power will be required from this power source by that date in order for the UK to meet its net zero target.

“Without a CfD, we are not going to get to the levels that we need to get to net zero,” she said, adding that “merchant” onshore wind projects being brought forward through corporate Power Purchase Agreements would pick up the most attractive sites for generation.