RenewableUK, Energy UK and Scottish Renewables have written a joint letter to the Secretary of State for Energy Security and Net Zero Grant Shapps, warning the government that if it does not make urgent changes to its Contracts for Difference (CfDs) auctions it may no longer attract investors and could undermine the supply chain that have been built up in the UK.
The organisations say the definition of value to the consumer of the CfD should be “fundamentally reframed to reflect net zero targets” and they warn, “The race to the bottom on strike prices incentivised by the current auction process is at odds with the reality of project costs and investment needs, jeopardising deployment targets. This is especially relevant for supply chain companies that have been recording losses as the continuous squeeze on strike prices has been passed on to them. CfD strike prices are no longer cost reflective and, consequently, the industry’s capacity to invest in critical infrastructure and domestic supply chain is being eroded”.
The associations point out that the US and the EU have stepped up their financial incentives and supportive regulations to developers and supply chain companies. They call for a bigger budget for the next auction (dubbed AR5) saying that a 2.5 times uplift is needed to take advantageofb the opportunity for new projects .
They want future auctions to have their parameters set transparently and to reflect the
economic environment (including supply chain costs and interest rates), and for auctions to have a clear schedule with targets out to 2030.
They also call for a separate auction ‘pot’ for offshore wind and continued support for emerging technologies including tidal stream and wave to help develop the supply chain and accelerate cost reductions.
RenewableUK’s Executive Director of Policy and Engagement Ana Musat said: “The parameters set by the government for this summer’s clean energy auctions are incredibly tight, and could even fail to unlock investment in shovel-ready renewable projects. These projects would not only deliver lower bills and new jobs in the sector, but are critical for maintaining the UK’s position as a global leader in renewables. International competition for investment in clean tech has never been more intense, so Ministers have to act quickly”.
Read the full letter Joint Trade Association Letter