The UK Government will set out the size of the budget for its next Contracts for Difference (CfD) auction in mid-March.
Helena Charlton, who leads the CfD process at the Department for Energy Security and Net Zero (DESNZ), confirmed the timeline for Allocation Round 6 (AR6) at a Westminster event this week.
The budget is among the most important parameters for the CfD auction process as it will help establish the number of viable renewable energy projects able to secure a contract.
Offshore wind developers have been awaiting more details on AR6 after the previous round, AR5 in September, failed to attract any offshore wind developers.
A poorly designed auction, coupled with inflationary pressures, were cited – however a reduced budget also played a role.
The government upped its budget for AR5 by £22m in August, to a total of £227m, but it was still well shy of £285m in Round 4, drawing criticism.
RWE senior regulatory affairs manager James Brabben told the event that clarity on the budget is needed as soon as possible.
“The sooner we can get a view of the budget for that auction the better to help us parties involved in that auction work out how successful it might be.
“It’s pretty clear we’ve got a backlog of projects coming through because we missed AR5, and AR6 could really be the catch-up auction that keeps us on-track to those 2030 ambitions if it’s budgeted in that way.”
Some key parameters of AR6 have been set out already, including increases to the strike price – up but 66% up for fixed wind to £73/ MWh and up 52% for floating offshore wind to £176/ MWh.
It also includes a revert back to a separate pot for fixed offshore wind, meaning it won’t be competing with cheaper tech, as was the case in AR5.
The budget will ultimately dictate the size of these pots, and the number of projects which can proceed.
Ms Charlton said: “We know that the sector is keenly awaiting the other parameters which will be announced in March 2024, and of course those are important because they include the budget for the round. We know that’s the other side of the coin to the ASPs (Administrative Strike Prices), so they are important.
“The budget is mostly determined by the pipeline of eligible pot projects, and that’s why we aim to leave the budget decision as late as we can to allow projects which are interested in participating in the round time to get their consents and their grid connections confirmed, and for us to get as much clarity as possible about which projects are going to take part in the round.
Parameters need to balance our objectives, and so of course in this round we definitely want to signal investor confidence, we want to maximise deployment of renewables – that’s important for our decarbonisation targets – but we also, within the legislation, have to ensure a fair price for consumers.”