UK gets ready for second CfD allocation round

(Photo: UK government)

The UK government has published a series of documents clarifying the rules for the upcoming second contracts for difference (CfD) allocation round.

The second CFD allocation round will begin on April 3, 2017, with the budget of £290 million designated for projects with the delivery date set in 2021/22, and 2022/23.

The application process is meant for less established technologies including wave, tidal stream, and offshore wind, among others.

The documents released yesterday, March 14, 2017, state the CfD bids will be ranked so that the cheapest projects get CfD first, regardless of the delivery year.

Strike prices are set at 310 £/MWh for wave, and 300 £/MWh for tidal, for projects deploying in 2021/22.

For projects deploying in 2022/23, the strike price for wave is set at 300 £/MWh, and tidal at 295 £/MWh.

Load factors for tidal have been set at 30.8%, while for wave the load factor is at 30%, and the application closing date for the round is on April 21, 2017.

However, the ‘minima’, a minimum level of deployment for which money would be specifically allocated, has not been specified for wave and tidal.

Frank Gordon, Senior Policy Analyst at the Renewable Energy Association (REA), said the lack of ring-fenced funds will likely ‘scotch’ the emerging renewables such as wave and tidal, as they have to compete with the more mature offshore wind.

Gordon said: “It is a further disappointment that there has been a decision to cap deployment from fuelled technologies, such as advanced waste to energy, and to not offer any guaranteed support for emerging renewables such as wave and tidal.

“What industry badly needs is a timetable for the next auctions after this one to allow them to plan for the longer term, which is now even more important in the light of the uncertainty over carbon prices and the LCF as a result of last week’s budget.”

A CfD is a private law contract between a low carbon electricity generator and the CfD counterparty, the Low Carbon Contracts Company (LCCC), which is an independently operated government-owned company.

Under CfD, a generator is paid the difference between the strike price, a price for electricity reflecting the cost of investing in a particular low carbon technology, and the reference price, a measure of the average market price for electricity in the market of Great Britain.

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