Energy UK respond to the Government’s announcement on budget for Allocation Round 5 of the Contracts for Difference Scheme

Responding to the Government’s announcement on budget for Allocation Round 5 (AR5) of the Contracts for Difference (CfD) Scheme, Energy UK’s Deputy Director, Adam Berman said:

 

“We welcome the Government’s decision to increase the budget for the next round of the CfD scheme. Industry has been clear that an insufficient budget and poorly designed price mechanisms would result in a disappointing auction result* – so an increase is a step in the right direction. However even this expanded budget remains almost £40 million less than that offered in last year’s auction.  

 

“While the budget increase is a positive development, it falls short of addressing the more fundamental problem – that the CfD regime no longer offers financially sustainable prices. Supply chain costs for renewables have risen between 20%-40% over the last year – yet this has not been adequately recognised by CfD prices for new projects. The recent decision to stop work on a major offshore wind farm that would have provided clean energy to 1.5 million households shows the danger of resting on our laurels.

 

“It’s important to stress that renewables will remain exceptionally good value for money , even at higher prices reflecting the current reality of international market conditions, The energy crisis has highlighted our reliance on volatile and expensive international gas markets. Renewables that provide clean, cheap, homegrown energy provide a route out of that crisis. However without putting the CfD regime on a financially sustainable footing, we risk consumers footing the bill as the UK falls behind other key markets.