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REA says Contracts for Difference budget will benefit larger energy companies

Date: Mon, 6 Oct 2014 | Author: Paul Sanderson

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The Government has launched the 2014 budget and allocation process for the 2014 Contract for Difference scheme.

It has confirmed that technologies will be divided into three pots with Pot 1 for established technologies, Pot 2 for less established technologies and Pot 3 for biomass conversion.

For Pot 1 technologies such as onshore wind (>5MW), solar photovoltaic (>5MW), energy from waste with CHP, hydro (>5MW and <50MW), landfill gas and sewerage gas, the 2015/16 delivery year allocation is £50 million at 2011/12 prices.

This rises to £65 million at 2011/12 prices in 2016/17 until 2020/21.

For Pot 2 technologies such as offshore wind, wave, tidal stream, advanced conversion technologies, anaerobic digestion, dedicated biomass with CHP and geothermal, there is no budget for 2015/16. But from 2016/17 it is set at £155 million at 2011/12 which then rises to £235 million in 2017/18 until 2020/21.

It has also set the strike prices for each technology – the price above which the revenue from selling energy to the grid must be paid back. See here for the full list of strike prices.

But the Renewable Energy Association warned that while the additional budget announcement is welcome, by allocating three and a half times as much budget to more expensive technologies in the first Contracts for Difference auction, Ministers have failed to deliver value for money for consumers.

REA warned that the budget and allocation process will disadvantage the SMEs that are prevalent in the renewable power sector, and will favour the vertically integrated utilities that are much better equipped to launch a successful auction bids under these arrangements.

It calls for the Government to introduce the following measures to benefit SMEs and independents:

  • Minima for all renewable technologies in the CfD scheme (currently only available for wave and tidal stream projects) so that every technology sector has the opportunity to invest in job creation, innovation, supply chains, skills development and cost reduction
  • Quarterly, rather than annual allocation rounds, so that unsuccessful bidders do not face an investment hiatus that could lead to closures and job losses
  • Workable proposals for biomass CHP projects to allow projects to continue without unpractical and burdensome regulations regarding heat markets
  • Reasonable budget allocation for biomass power and the more established technologies (such as onshore wind, solar power and waste to energy) to ensure value for money for the customer.

 

REA chief executive Nina Skorupska (pictured) said: “Coalition ministers have talked endlessly about cracking open the energy market and growing the renewable energy economy, but they haven’t put their money where their mouth is with this new CfD scheme.

“Firstly, the allocation process is still to risky and complicated for most of the renewable energy independents and SMEs that are trying to break into the UK’s consolidated energy market, further entrenching the dominance of the vertically integrated utilities. Biomass developers in particular are struggling with flawed rules on implementing combined heat and power.

“Secondly, in both the short term and long term, ministers have failed to deliver value for money. In the short term, the cheaper, more established technologies have been given less than a quarter of the available budget in the first round, with the rest going to the less established technologies. In the longer term, these younger, less established technologies will struggle to achieve cost reductions without minima to guarantee their continued growth.”

 

Category: Energy
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