The biggest ever round of the UK Government’s flagship renewable support scheme is opening to applications today with £285 million a year available across Great Britain, which will help build the next generation of Wales’s green energy projects.
Renewable energy projects in Wales can now bid for funding in the fourth round of the Contracts for Difference (CfD) scheme, which is aiming to secure 12GW of electricity capacity across Great Britain – more renewable capacity than the previous three rounds combined. The additional offshore wind capacity resulting from the funding alone could generate enough electricity equivalent to powering around 8 million homes.
Compared to the previous round, this is open to an expanded number of renewable energy technologies across Wales, with offshore wind, onshore wind, tidal and floating offshore wind projects, amongst others, all eligible to bid for funding in the scheme’s auction process.
The competitive nature of the CfD scheme has been hugely successful in driving the deployment of renewable energy across Great Britain whilst rapidly reducing costs. The scheme’s design has led to the price per unit of offshore wind to fall by around 65% between the first allocation round in 2015 and the third in 2019.
Business and Energy Secretary Kwasi Kwarteng said:
“This scheme has been key to the UK becoming a world leader in renewable energy and we are pushing those boundaries even further by injecting £285m a year into the sector that will bring forward exciting new clean technologies across Wales and push existing success stories to new heights.
“From Cardiff to Colwyn Bay and Abergavenny to Anglesey, the abundance of Wales’s natural resources are helping to safeguard our future by tackling climate change and ensuring we move away from the volatility of global fossil fuel prices.”
A total budget of £285 million per year (2011/12 prices) has been allocated to the fourth round, with £200 million available for offshore wind, £75 million for emerging technologies, such as remote island wind, tidal stream and floating offshore wind, and £10 million for established technologies, such as solar and onshore wind.
Within emerging technologies, £24 million a year has been ringfenced for floating offshore wind projects and £20 million initially set aside for tidal stream projects, demonstrating the UK Government’s support for new, innovative technologies.
The £20 million per year support for tidal stream projects represents the biggest investment into tidal power in a generation, kickstarting a brand-new chapter for the tidal industry that could also have the benefit of creating jobs across the UK.
Wales already has excellent tidal stream resources and is well positioned to play a global leading role in marine energy. Over time Welsh marine technologies have the potential to significantly contribute to the UK’s decarbonisation commitments and could support hundreds of green jobs across the country, with projects currently in development in North Wales.
Onshore wind is competing in an allocation round for the first time since 2015.
Secretary of State for Wales Simon Hart MP said:
“Wales is uniquely placed to take advantage of this funding support. We already have a track record of fantastic work in the renewable energy sector. Wales has both the natural resources and the expertise to drive this even further.
“I’m incredibly proud that the UK Government is supporting this growing industry which is so vital for our Net Zero ambitions. And this growth means more well-paid and highly-skilled jobs, spreading prosperity and helping to create a modern, green economy in Wales.”
Subject to the outcome of the competitive auction, it is expected that AR4 will be a major step towards delivering the government’s increased ambition to have 40GW of offshore wind by 2030, including 1GW to come from floating offshore wind, as set out in the Ten Point Plan for a Green Industrial Revolution.
UK Energy and Climate Change Minister Greg Hands said:
“The Contracts for Difference scheme is proof that green and growth go hand-in-hand as it continues to be a key driver behind the world-leading renewable energy sector that is providing us with secure clean energy, creating jobs across Wales and opening investment and export opportunities.
“The previous three rounds have allowed us to push forward with the Green Industrial Revolution and this round will take us further and faster than ever before while continuing to drive down costs for consumers.”
There has also been a strengthening of the supply chain plan process, so the CfD’s fourth round can support the effective development of open and competitive supply chains and promote innovation and skills in the low-carbon electricity generation sector.
RenewableUK CEO Dan McGrail said:
“This is set to be a landmark auction securing the largest amount of new renewable energy capacity so far, as Ministers have listened to our calls for the overall capacity cap to be lifted to reflect the enormous appetite among companies and investors in UK projects.
“More than 16GW of wind could be ready to compete and over 23GW of renewables overall. We could see investment of over £20bn in this round, creating thousands of jobs and cutting costs for energy consumers.
“We need a range of renewable technologies to get us to net zero as fast as possible, so it's great to see the development of innovative floating wind and tidal stream projects supported by ring-fenced funding, as we've been advocating. This will enable us to ramp up the roll-out of these cutting-edge technologies, building up massive industrial opportunities for the future, including exports.”
Low Carbon Contracts Company CEO Neil McDermott, said:
“We’ve been supporting new low-carbon power projects through the CfD scheme since its inception, so we’re incredibly excited to see what the next Allocation Round brings. The current CfD portfolio features projects located across the length and breadth of Great Britain, including some of the world’s largest offshore wind farms to date.
“We’ve seen the scheme’s impact on diversifying and increasing the investment needed to support vital new low-carbon power, and this year’s COP26 only served to underline the critical timing of this round.
“We’ve learned a fantastic amount to date and we stand ready to support the ambitious infrastructure that will power the UK’s transition to Net Zero emissions by 2050, as well as protecting the long-term health of our environment, economies and societies.”
Key points (£ budgets in 2011/12 prices):
Pot 1: Established technologies (includes Onshore wind, Solar and Hydro):
- £10 million pot budget
- 5GW capacity cap
- Maximum capacity limits of 3.5GW imposed on both onshore wind and solar PV
Pot 2: Less-established technologies (includes Floating Offshore Wind, Tidal Stream, Geothermal and Wave):
- £75 million pot budget
- No capacity cap
- Within the £75 million total, £20 million ringfenced funding for tidal stream projects and £24 million initially ringfenced funding for floating offshore wind projects
Pot 3: Offshore wind:
- £200 million pot budget
- No capacity cap
The latest round of the CfD scheme supports the Prime Minister’s Ten Point Plan for a Green Industrial Revolution, which outlines an ambitious vision of a low-carbon future for the UK, and will ensure that clean energy continues to play a key role in ending our contribution to climate change entirely by 2050.