Rapid ‘surgery’ required for stalling CfDs

The CfD (Contracts for Difference) process requires “surgery as quickly as possible” to get the next allocation round (AR) of the ailing renewables support mechanism back on track, the government has been warned.

The publication of the results for this year’s AR5 auction saw no offshore wind developers bid for CfDs because the minimum ‘strike’ price offered by the government was too low to compensate for spiralling inflation in their supply chains.

Ana Musat, RenewableUK’s executive director for policy and engagement, told a meeting of the All-Party Parliamentary Group on Energy Costs that there is no time to waste on next year’s round.

“The single most important thing is that we get the next allocation round working properly. Allocation Round six is coming up next year. We obviously can’t wait until next year, we need surgery as quickly as possible,” she said.

“We need a timeline that doesn’t indicate this is business as usual because it’s not.”

She said that international investors particularly require “very, very quick reassurance” that the parameters for upcoming auctions, such as the strike price, would be more generous than those on offer this year.

And Musat said the industry requires “greater transparency” on these parameters of future auction after being “taken aback” by the figures put forward by the government for this year’s auction despite prior engagement.

James Brabben, senior manager regulatory affairs at energy developer RWE, told the meeting that AR5 had been a “huge failure” that was “probably quite preventable”.

And this year’s round marked the end of a long run of auctions, which has seen the price of offshore wind power progressively fall over the past decade, he said: “We’ve been obsessed with price discovery from auction to auction, which has been really, really important in bringing prices down and has been exciting every time it’s happened.

“We’re not in that period anymore. We’re in a period of we need to get things built as quickly as possible to meet targets and carbon objectives.”

Marta Krajewski, deputy director, policy (investments) at Energy UK, added: “This is obviously a big setback for the for the offshore sector and for our decarbonisation targets if we take into account that offshore (wind) is supposed to be the bulk of the technologies for our future generation mix.”

To read more on the fallout from the latest CfD auction, click here to access Utility Week’s latest digital weekly issue.