Secretary of State for Energy Security and Net Zero, Ed Miliband, has confirmed the budget for this year’s Contracts for Difference renewable energy auction is being increased by £500 million to over £1.5 billion – a record budget.
The budget for this latest round, known as Allocation Round 6 (AR6), was already the largest announced for a single CFD auction round when it opened for bids from developers in March.
As ever, the funding will be split into ‘pots’ representing different energy types.
Tidal stream, wave energy and floating offshore wind (FLOW) will all compete in Pot 2 of the allocation, which has increased by £165 million – from £105 million to £270 million.
The Department for Energy Security and Net Zero also confirmed the previous £10 million ringfence for tidal stream technology will be increased to £15 million – making AR6 the UK’s third consecutive auction with funding specifically set aside for tidal stream.
Last year, in Allocation Round 5, 11 tidal stream projects, four of which were in Wales, were awarded contracts, securing over 50MW of capacity, 22MW in Wales.
Wales is already rapidly positioning itself as a global leader in terms of tidal stream technology and this uplift could help continue this trajectory, with the potential for further contracts to be awarded at Morlais on Anglesey.
Tom Hill, Programme Manager at Marine Energy Wales said:
Whilst not the £30m ringfence the tidal stream industry had been calling for, an uplift of £5 million is an extremely welcome and positive step forward for tidal stream technology, which will play a key role in achieving the UK and Wales’ Net Zero ambitions.
An extra £165 million for emerging technologies such as tidal stream, wave and floating offshore wind (FLOW) is significant and has not gone unnoticed. However, competition for this funding is fierce and projects from right across the UK will be competing for a share; including in places like Scotland and the North East of England where supply chains have already been established.
As an industry, we now need to focus on advancing the offshore wind sector in Wales, particularly Test & Demonstration projects in the Celtic Sea, which will incentivise port and supply chain investment here and ensure we don’t miss out on this opportunity.
John Jenkins, director with Menter Môn Morlais said:
This announcement shows the government’s commitment to renewables and their confidence in tidal stream technology. As the largest consented tidal stream project in Europe, we know the important part schemes like ours play in the generation of clean electricity, which will be crucial as we aim for net-zero.
For us on Anglesey there is added significance, as it gives tidal technology developers already committed to Morlais the confidence to plan ahead and to expand their capacity here. I’m certain the move will promote innovation and ensure we remain at the cutting edge of the sector as well as encourage new developers to explore how they can work with us.
“As with any project of this scale, we’re on a journey, we know there’s a long way to go to deliver the project’s full potential. We’re determined to be a lead player in this emerging sector so that we can achieve what we set out to do – deliver local benefit and add value throughout the supply chain and for our communities.
And whilst we welcome today’s announcement, there is always more that can be done, so we would call on government to look how it can go further to promote projects like ours at Morlais.
Sue Barr, Chair of the Marine Energy Council, also welcomed the announcement:
The UK Government has demonstrated international leadership in increasing the tidal stream ringfence to £15m. This is an important step forward in realising the potential of this entirely predictable renewable energy resource.
The UK can lead the world in harnessing the power of its tides, and in exporting tidal stream technology and its expertise around the world.
The Government’s ambition is to make Britain a clean energy superpower. We believe that tidal stream will be a key technology in realising that mission.
Energy Secretary Ed Miliband said:
Last year’s auction round was a catastrophe, with zero offshore wind secured, and delaying our move away from expensive fossil fuels to energy independence.
Instead, we are backing industry to build in Britain, with this year’s auction getting its biggest budget yet. This will restore the UK as a global leader for green technologies and deliver the infrastructure we need to boost our energy independence, protect billpayers, and become a clean energy superpower.
The Contracts for Difference scheme works by developers bidding for contracts to help deliver renewable energy projects, with the scheme providing a guaranteed price for the clean electricity they generate. This gives industry greater certainty to invest, knowing that when electricity prices fluctuate, they will always get a set price for their projects.
The scheme’s design awards contracts through a series of competitive auctions, where the lowest price bids are successful.
Following the increase, the Allocation Round 6 (AR6) budget includes:
- £1.1 billion for offshore wind, an uplift of £300 million
- £185 million for established technologies such as onshore wind and solar, an uplift of £65 million
- £270 million for emerging technologies such as floating offshore wind and tidal, an uplift of £165 million
The increase means the AR6 budget is 7 times higher than that of Allocation Round 5 (AR5).
The results of the next CfD allocation round are expected in September.