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13/09/2021

£265 million annual commitment set out as part of Contracts for Difference scheme

Words: Laura Edgar
Renewable wind energy / Shutterstock 155706680

The government has announced that £265 million per year will be provided to businesses in the fourth round of the Contracts for Difference (CfD) renewable energy scheme.

The scheme is open to projects operating in Great Britain and seeks to incentivise investment in renewable energy by providing developers of projects with high upfront costs and long lifetimes with protection from volatile wholesale prices. In turn, this ensures consumers don’t pay increased costs when electricity prices are high, the government explained.

The fourth round of the scheme aims to double the renewable electricity capacity secured in the third round and generate more than the previous three rounds combined. 

Contracts for Difference pots

Pot 1: Established technologies (includes onshore wind, solar and hydropower):

  • £10 million pot budget
  • Cap of 5GW on total capacity
  • Maximum capacity limits of 3.5GW imposed on both onshore wind and solar PV

Pot 2: Less-established technologies (includes floating offshore wind, tidal stream, geothermal and wave):

  • £55 million pot budget
  • No capacity cap imposed
  • £24 million ringfenced support for floating offshore wind projects

Pot 3: Offshore wind:

  • £200 million pot budget
  • No capacity cap

Of the cash, £200 million will go towards supporting offshore wind projects.

The government estimates that the additional offshore wind capacity resulting from the funding could power around eight million homes. It will also, the government said, help meet the Conservative's manifesto commitment to ensure the UK has 40GW of capacity by 2030. 

Also, £55 million will be available for supporting emerging renewable technologies. £24 million of that is ringfenced for floating offshore projects for the first time, showing commitment to the development of what is considered to be a high-potential, innovative technology.

Established technologies such as onshore wind and solar will be able to bid for the first time since 2015, with up to 5GW of capacity from these technologies sought for a £10 million budget. 

Energy minister Anne-Marie Trevelyan said: "The Contracts for Difference scheme has helped the UK become a world leader in clean electricity generation and lowered prices for consumers.

"The new plans set out today deliver on the Prime Minister’s Ten Point Plan and will support the next generation of renewable electricity projects needed to power our homes and meet our world-leading climate change targets."

Commenting on the CfD allocations, RenewableUK chief executive Dan McGrail said they will "encourage even greater investment in renewables" and they are a "huge boost" for the UK’s green recovery. 

"We could see investment of over £20 billion on the back of the next clean power auction, which will boost jobs and the UK supply chain, and cut costs for consumers in the transition to net zero.

“In this round we want to see just how low the price of new solar and onshore wind has fallen in the past five years, and make sure that the auction does the heavy lifting to take us towards our 2030 target of 40GW offshore wind.  

“There is a huge appetite for investment in floating offshore wind in the UK. It’s a technology that is vital for net-zero and which has a truly global potential. The dedicated support for floating projects at the upcoming auction will help the UK to compete with the other countries vying for global leadership in this new technology.”

Image credit | Shutterstock

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