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Prospects For The Next CfD Auction

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Neil Budd is a solicitor and Director of Renewable Energy at the London office of law firm SGH Martineau LLP

Now that the dust has settled on the CfD auction last month, the solar industry is digesting the results and working out what it means for the future of large-scale projects. 

A brief summary of the results for the "established technology pot" comprising solar, onshore wind and energy-from-waste is as follows. 

For the first delivery year (2015/16), solar projects totalling 32.88 MW were awarded CfDs at a strike price of £50/MWh and no projects in the other categories were awarded CfDs. 

For the second delivery year (2016/17), solar projects totalling 38.67 MW were awarded CfDs at a strike price of £79.23/MWh.  Onshore wind projects totalling 45 MW were awarded CfDs at the same strike price.

In subsequent years, no solar projects were awarded CfDs.

Overall, five solar projects, fifteen onshore wind projects and two energy-from-waste projects were awarded CfDs. The general consensus has been that onshore wind did very well out of the auction, with a total of 748.55 MW of projects receiving CfDs compared with 71.55 MW for solar. However it is interesting to note that, for the onshore wind projects, only 45MW of projects received CfDs in the delivery years prior to April 2017, which is the date that ROCs will close to onshore wind.  It appears therefore that the vast majority of onshore wind projects (over 700 MW) were projects with deferred connection dates that would not be eligible for ROCs and thus had no choice but to get a CfD.

It will be interesting to see how many of the solar projects that were awarded CfDs will actually get built. It is difficult to see any projects in the first delivery year being built as £50/MWh is surely not economic at the moment.  The fact that projects were awarded at that strike price is presumably due to a strategy by bidders to submit a low price in order to secure a CfD in the hope that the marginal price would be substantially more as other successful bidders came in at higher prices.      

In terms of future prospects, the key issues for solar developers will be how many onshore wind developers are likely to bid for CfDs in the next auction.

According to statistics published by RenewableUK (formerly the British Wind Energy Association), there are 5.675 GW of consented onshore wind projects. However, if we take out from this figure projects which have already obtained CfDs in the first auction, projects in Northern Ireland and projects below 5 MW, the number of consented projects falls to approximately 3.8 GW. If we add to that figure the projects that will receive consents between now and the auction next October, there is likely to be approximately 4 GW of projects which would be eligible to bid for a CfD in the next auction.  If even a quarter of these projects bid for a CfD, it would probably use up the entire budget; however, given that these project developers could presumably have put in a bid in the first auction and chose not to do, it will be interesting to see whether the results of the first auction causes more of them to throw their hat into the ring next time.                   

     

        

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