Coutinho: Halting CfD auction may have imperilled renewable pipeline

Halting last autumn’s botched Contracts for Difference (CfD) auction, which saw no offshore wind bids submitted, could have put “at risk” the remaining renewable energy procured by the exercise, energy secretary Claire Coutinho has claimed.

Pressed on why the Department for Energy Security and Net Zero (DESNZ) had not heeded warnings from offshore wind developers that the auction strike price was too low, Coutinho told the House of Lords industry and regulators committee that offshore wind had had a “difficult year globally” and in “many other countries, as well as the UK”.

No offshore wind developers put in bids for CfDs because the minimum ‘strike’ price offered by the government was too low to compensate for spiralling supply chain inflation.

However the government was able to procure 3.7GW of renewable power, mainly comprising bids from onshore solar and wind farms, which Coutinho hailed as a “record” figure for a single year.

Much of the movement in supply chain costs had taken place between March and September when the auction was already in process, she said: “You could have completely halted that auction and put at risk the 3.6GW of renewable energy we did get.”

DESNZ’s permanent secretary Jeremy Pocklington rejected a call by the committee, in its 2022 report on delivering net zero, for government borrowing to contribute a bigger share of the costs of transitioning to a lower emission energy system.

Defending the existing reliance on consumer bills rather than general taxation to fund costs like paying for CfDs, he said: “Where costs are directly relevant to the electricity system, it is appropriate that the bulk of costs are funded through that system.”

But Pocklington also said that it is “important to keep costs in proportion”, pointing out that wider policy costs only make up £157 and CfDs less than £20, of the typical £1928 energy bill under the price cap.

He added: “Obviously we need to bear down on costs but we need to look at this in the round.”

Coutinho also hailed the “enormous way” the UK has achieved, pointing to figures published this week showing that UK emissions halved between 1990 and 2022, which was the “first time” that any country had reached this landmark, she said: “No major economy has made more progress than us and that’s worth recognising.

“It’s hard to say we are not ambitious enough as a country because nobody is as ambitious as us,” she added.