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Government announces new auction system

The government has announced which technologies and companies have won low-carbon energy contracts in the new Contracts for Difference (CfD) auction for renewable energy. 

CfDs are the new support mechanism for nuclear, CCS and renewable energy introduced by the coalition government to replace the main support for large-scale renewables, the Renewables Obligation.

The auction, held earlier this year, required “established” renewables to compete with each other directly for a share of £50m for the next year, and an additional £15m for later projects.

Solar Trade Association (STA) said the results were disappointing for solar, but not surprising as solar could very soon be competitive with fossil fuels without subsidy.

Solar only won five contracts, with just two to be built the coming financial year and three in the next. Onshore wind won 15 contracts.

STA chief executive Paul Barwell said: “Unfortunately, this result is as disappointing as we predicted. The soon to be cheapest and most popular renewable – solar power – has lost out in a complex auction scheme that favours big players and genuinely established technologies.

“It is likely that very few solar companies even submitted a bid for a contract. The problem is that it was just far too much of a risk for a small or medium-sized solar company to even put in a bid. The system was a bit like asking first-time buyers to put down on deposit on a house, without knowing whether they were going to be able to buy the house at the end of the process – and with the risk of losing their deposit.”

The Association for Decentralised Energy said more work needs to be done to ensure policy design allows all technologies and investors to participate on an even-playing field.

Association for Decentralised Energy director Dr Tim Rotheray said the design of the scheme makes biomass CHP almost uninvestable, preventing many potential projects from participating and limiting the options for industry to invest in their future competitiveness.

He added: “For industrial sites that use large amounts of heat and power, highly efficient biomass CHP is one of the few options for delivering emissions reductions, cost savings and improved competitiveness.

“Developing new policies can be a challenging process and the auction shows government needs to support industrial competitiveness by improving certainty for biomass CHP schemes in future allocation rounds.”

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