Tuesday 4 July 2023

Energy industry urges government to reform clean power auctions

Energy industry urges government to reform clean power auctions

Three prominent trade associations in the energy sector, RenewableUK, Energy UK and Scottish Renewables, have jointly called for urgent reforms to the clean power auctions conducted by the government, known as Contracts for Difference (CfDs).

In a letter addressed to the Secretary of State for Energy Security and Net Zero, Grant Shapps, the trade associations emphasised the need for a broader approach in defining the most effective ways to derive value from the auctions, starting from Allocation Round 5 (AR5).

They underscored the importance of considering the current economic environment, international competition in the sector and the benefits that timely deployment of cost-effective renewable energy can bring to the UK.

The letter also highlighted concerns that the current auction process, which places significant emphasis on securing renewable capacity at the lowest possible strike price, may be counterproductive.

This approach could deter potential investors and hinder the achievement of deployment targets, according to the group.

To address these issues, the trade associations proposed several recommendations. Firstly, they suggested reassessing and increasing the budget for the upcoming auction (AR5) to accommodate newly eligible projects.

The trade associations further called for closer alignment of CfD parameters with the economic environment, including supply chain costs and interest rates, in future auction rounds.

Energy UK’s Deputy Director Marta Krajewska commented: "If the scheme is to continue playing this vital role and delivering value to consumers, there needs to be a recognition of the cost increases, along with much greater international competition, that has accumulated for renewables projects over recent months."

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."

Andrew MacNish Porter, Policy Manager at Scottish Renewables, said: "The latest CfD has failed to account for an increasingly challenging economic environment and there is a real risk that this summer’s auction will fail to secure this much-needed industry investment."

Energy Live News has contacted the Department for Energy Security and Net Zero for comment.

Written by

Bruna Pinhoni

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