The Government announcement yesterday that it will extend contracts to 20 years for solar and other key technologies is a pivotal step forward for the clean energy sector, says Solar Energy UK. The policy will reduce the cost of capital, reduce exposure to market price risks and better align the UK’s support mechanisms with the long operational lifetimes of solar assets. An accompanying impact assessment suggests that that the average dual-fuel household bill will fall by around £5 per year in the medium term.
The standard term for a CfD has been 15 years since the scheme began eleven years ago, whereas a typical planning condition for a solar farm is being in place for 40 years.
Another standard requirement for CfDs is that developers designate a target commissioning window in their allocation round submissions, which must accord with one of the round’s delivery years. If commissioning has not happened within three months of the target, payments are reduced.
However, this condition does not allow for even moderate delays, which can be often outside developers’ control.
An earlier consultation proposed that the period should be extended to six months. Following feedback, the Government has decided that 12 months is more appropriate.
“We are delighted to see the target commissioning window quadruple in length to a full year” said Chris Hewett, Chief Executive of Solar Energy UK. “This significant change acknowledges the evolving landscape of solar development, where larger projects face increased commercial and delivery challenges, including supply chain constraints, grid connection delays, and planning complexities. By providing greater flexibility, this reform will reduce the risk of contract erosion, lower bid prices and enhance developer confidence, ultimately benefiting consumers through more competitive strike prices.”
The package of reforms come ahead the seventh auction round for CfDs, expected to be held over August.
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