Part-built projects could be locked out of CfD

The government is exploring moves to exclude partially built renewables projects from competing for support through the Contracts for Difference (CfD) system.

In a new ‘call for evidence’ document, issued alongside the Energy White Paper last week, the Department for Business, Energy & Industrial Strategy (BEIS) is seeking views on how the billpayer supported scheme for supporting low-carbon projects could be reformed.

Under the existing eligibility criteria for CfDs, only projects which have been commissioned and started generating electricity are excluded from applying through the scheme.

The plummeting costs of some renewable technologies, such as solar and wind, means that developers are looking at deploying more such projects by selling the electricity they generate onto the wholesale market without a CfD, says the paper.

Some offshore wind developers are exploring developing schemes without a CfD contract and relying entirely on wholesale market prices, following in the footsteps of the increased number of solar projects that have gone down this route.

The call for evidence document seeks views on whether it is “appropriate” to continue to allow part-built projects to compete in future CfD auction rounds in this context and the likely impact such an exclusion would have on meeting the government wider goals to boost renewable generation.

The paper explores other proposals designed to reduce the insulation of CfD supported projects from the wider electricity wholesale market.

These include moving the reference price used for intermittent generators from the day-ahead hourly market to the seasonal market price used for baseload plants.

Others include capping the amount of subsidy provided at times of low prices and reducing CfD contract lengths from the current 15 years so that projects are exposed to merchant prices sooner.

The paper also moots moving to a price floor to protect generators against low prices, which could be combined with a cap that would oblige companies to payback extra revenue earned at very high prices.

Greater exposure to market signals could cause projects to avoid locating nearby rival developments, or adjust maintenance schedules to maximise availability during demand peaks, says the paper.

“As intermittent renewable technologies continue to make up a greater proportion of our generating mix, there may be a need for that generation to be able to respond better to the time-value of power.”

However, the paper says an imminent start on a “major restructure” of the existing CfD framework for incentivising investment in renewables is not envisaged.

Responses to the call for evidence should be submitted by 22 February.