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The Association for Renewable Energy and Clean Technology (REA) has petitioned the government to make an extra £2 billion of annual subsidies available through future Contracts for Difference (CfD) auctions, primarily to help develop emerging renewable technologies such as wave and tidal power.
In a new report setting out its requirements for a green recovery following the coronavirus pandemic, the trade body said the funding would support the deployment of 15 to 20GW of additional generation capacity.
“There’s clearly a lot of renewables which haven’t had the same cost trajectory as offshore wind as they haven’t had the same levels of support,” said Frank Gordon, head of policy at the REA. “To fully deploy them, we’re going to need to spend a bit more.”
He said the funding could partly come from the budgetary savings secured in the previous auction round in 2019 when multiple offshore wind projects won contracts at strike prices below the government’s forecasts for the market over the early years.
Speaking to Utility Week, Gordon said the REA supports the government’s proposals to introduce a separate pot in the auctions for offshore wind: “We do think there’s a lot of value in a wide range of technologies receiving support and it does tend to dominate pot 2 at the moment. Anything which encourages a wider range of renewable technologies to deploy is welcome.”
The organisation also called for ring-fenced funding for some technologies, including £200 million of annual subsidies for energy storage. It said there should be a particular focus on technologies that are able to store energy over long periods.
“It’s just not being built at the moment, partly due to the lack of long-term support available at a decent price,” said Gordon. “We think the CfD mechanism with its 15-year contracts would be hugely powerful for being able to finance green energy storage projects.”
To help developers plan ahead, Gordon said CfD auctions should be held every six months: “At the moment, people don’t know when the next auctions will be and then that means they don’t really know what to do with their resources. They can’t really build viable long-term pipelines.”
Asked whether holding auctions so frequently might make them less competitive, Gordon responded: “I don’t think that will be the case because you’ve got this backlog of offshore wind. You’ve obviously got onshore wind and solar with huge pipelines in pot 1 and now you’ve got the remote island wind in pot 2 as well which will continue to build.
“I don’t think there’s a risk of a lack of projects out there.”
Other requests in the report include reforming VAT and business rates to make them more favourable to renewables and spending £1.1 billion annually on a programme to retrofit some of the least energy efficient homes in the UK.
REA chief executive Nina Skorupska said: “It is no longer enough to support a net zero economy in rhetoric alone. We must ensure that renewables are at the core of the recovery if we are to achieve the just and inclusive society the government has been referring to.
“The prime minister has already outlined the first stage of the recovery package, which was underwhelming and lacked details. This report therefore comes at a timely moment, serving to remind the government of the enormous opportunities that renewable energy and clean technology can offer them in their bid to deliver a green recovery.”
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