The Government will set out further details for the next Contracts for Difference auction where companies will compete for the first £290 million worth of contracts for renewable electricity projects. The second Contracts for Difference auction will result in enough renewable electricity to power around one million homes and reduce carbon emissions by around 2.5 million tonnes per year from 2021/22 onwards. It will also allow developers of innovative renewable technologies to deliver the best deal for bill payers. For example, the maximum price for offshore wind projects is now 25 percent lower than was set for the last auction, and a competitive auction could bring that price down further.
The proposals also include details of the next steps to phase out electricity generation from unabated coal-fired power stations within the next decade. This long-term plan will provide confidence to investors that the UK is open to investors in new, cleaner energy capacity, building a diverse energy system giving Britain greater security of supply.
This will include record investments in renewable technology. However, it also includes gas and new nuclear power investment, which many in the UK have criticised.
“We’re sending a clear signal that Britain is one of the best places in the world to invest in clean, flexible energy as we continue to upgrade our energy infrastructure” said Business and Energy Secretary Greg Clark. “This is a key part of our upcoming Industrial Strategy, which will provide companies with the further support they need to innovate as we build a diverse energy system fit for the 21st century that is reliable while keeping bills down for our families and businesses.”
The plans are essential elements of the Government’s overall strategy to upgrade the UK’s energy infrastructure, lower the country’s carbon emissions and spur the growth of large scale, low-carbon energy – a key part of the global deal to tackle climate change agreed in Paris last year.
Taking unabated coal power out of the UK energy mix and replacing it with cleaner technology, will significantly reduce emissions from the UK’s energy use. The government first announced its intention to take unabated coal out of the energy mix in November last year.
The Government is also looking to end uncertainty over whether onshore wind projects on remote islands should be treated differently from onshore wind projects on mainland Great Britain. A consultation has been launched asking for views which either support or oppose this position, which will be reviewed to provide a comprehensive answer.
The application process for the Contracts for Difference allocation round will open in April 2017. The Government expects enough interest from developers for a competitive auction to be triggered, as the budget would be insufficient to meet all applications at their administrative strike price. The allocation round will focus on less established technologies such as offshore wind, Advanced Conversion Technologies, Anaerobic Digestion projects of less than 5W, dedicated biomass with Combined Heat and Power (CHP), and wave, tidal stream and geothermal projects starting to generate from 2021/22 or 2022/23.
The Government is to publish a call for evidence on fuelled technologies and geothermal costs in the Contracts for Difference scheme, which will inform future policy, considering whether the support currently offered to fuelled technologies is right to deliver the country’s goals on bioenergy as well as broader departmental objectives on value for money for decarbonisation. The fuelled technology cumulative cap of 150 MW for the auction is a temporary, precautionary measure introduced while the Government considers these issues.
The consultation on whether onshore wind projects on remote islands should be treated differently from onshore wind projects will be open for 12 weeks until 31st January 2017.
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