Energy trade groups RenewableUK, Energy UK and Scottish Renewables have urged the UK to make significant changes to its annual clean power auctions. The groups warned that, without changing the current focus on minimum price, the UK’s renewable-energy plans could founder on rising equipment and installation costs.
The groups warned in a joint letter that continuing to focus auction criteria on the lowest possible strike price (bid) would create a “less attractive investment environment in the UK” relative to other global markets. The need to focus on minimum price conflicts with the “reality of project costs and investment needs,” particularly for companies in the renewables supply chain, which have been losing money from price pressure exerted by the auction format.
“The latest CfD (contract for difference) has failed to account for an increasingly challenging economic environment and there is a real risk that this summer’s auction will fail to secure this much needed industry investment,” said Andrew MacNish Porter, Policy Manager at Scottish Renewables. “We urge the government to reassess the parameters of this year’s auction immediately as well as consider longer term reforms.”
The UK government launched a review of the CfD auction process in April. The review also aimed to “ensure renewable energy developers can make the necessary investment in supply chains and innovation,” claimed UK energy minister Graham Stuart. However, the CfD he admitted that the CfD was still centred on the “overriding priority for the UK to have amongst the cheapest wholesale electricity prices in Europe.”
The letter from the trade groups said that it was all very admirable for the UK to want low energy prices, but in the real world it had to compete for developers’ attention on a global market. And, the groups claimed, some competitors were offering subsidies. The trade associations noted that the US and the EU have both enacted financial incentives and favourable regulations for developers and their suppliers.
The groups have therefore asked for three changes.
First, they petitioned the government to raise its subsidy budget for this summer’s auction round by a factor of at least 2.5 and to set aside a dedicated pot for fixed-foundation offshore wind.
Secondly they called for dedicated set-asides for tidal and floating wind power.
Finally they asked for a clearly-communicated formula setting out how auction terms would change to match changes in the economy and the supply chain. “A clear schedule with auction parameters, budgets and capacity targets would provide a clear roadmap towards net zero,” the groups argued.
“International competition for investment in clean tech has never been more intense, so ministers have to act quickly. Time is running out, not only to secure new renewable projects in the coming months, but also to set up a framework for the rest of this decade to ensure that longer term investments in manufacturing come to the UK instead of going overseas,” said RenewableUK’s Executive Director of Policy and Engagement Ana Musat.