Regen Responds To CfD Details

Regen SW has issued commentary on the recent UK Government budget statement for renewables with DECC announcing budget allocations for renewables and signalling thel start of tougher world for renewables according to the company.

 "The announcement by DECC of the £205m budget for renewables in the first auctioning round under its new Contracts for Difference (CfD) system marks the start of a much tougher world for renewable energy projects," said Merlin Hyman, chief executive of Regen SW.

The company statement said the new system has clear advantages once a project is awarded a CfD but the lack of awareness  of financial support at the start of the scheme will be troublesome for many. The CfDs awarded will be binding private law contracts much less vulnerable to political change and with the risk of brown price power movements removed.

There is now a much greater risk for developers that they won't be able to access a subsidy for their project, in particular there is no certainty when CfD allocation rounds will take place. Currently these are set out as annual but there is nothing to stop government from not holding a round, or providing very small budgets.

Government will be making political decisions at each allocation round on which technologies to support. An example of this is the creation at a late stage of a "˜pot' specifically for biomass conversion.

If budget allocation and auctions are annual this will create an industry geared around an annual bidding cycle, which will create challenges and inefficiencies for the supply chain.

The annual subsidy budget of £205 million sets an absolute cap on the scale of renewables development, so that good quality competitive projects may still miss out.

The introduction of competitive allocation of subsidies including competition between technologies such as onshore wind and solar at different stages of development.

It is clear that it will be much harder in the future to access subsidies for renewables projects and we are moving towards a post subsidy world. However, to achieve continued cost reduction and to develop a world leading renewables industry we need the CfD system to provide a clearer and longer term framework against which to invest.