The flagship Contracts for Difference (CfD) renewable power auction published the results of its Auction Round 5 (AR5) last week, with solar projects securing almost 2GW of capacity out of a total of 3.7GW.
The previous AR4 had a budget of £285 million compared to AR5’s £227 million funding, £58 million below the 2022 AR4 commitment. The previous round secured almost 11GW of renewable generation, with 7GW of offshore wind being the biggest winner.
AR5 is the first round to be held since the CfD scheme started to be held annually, and has been seen as a setback to investment in renewables in the UK. Wind energy groups like RenewableUK said that the strike price of £44 per MWh for wind was too low. As a consequence, no offshore wind projects secured contracts in AR5.
Despite the fall in capacity awarded, the government said AR5 would award a “record number” of projects, with 95 projects having been successful with their bids, up from 93 in the previous round.
This number included “significant numbers” of solar power and onshore wind projects, and a record number of tidal energy schemes. Geothermal plants have also been successful for the first time, the Department for Energy Security and Net Zero (DESNZ) said.
Energy and Climate Change Minister Graham Stuart said: “We are delighted that our first annual CfD auction has seen a record number of successful projects across solar, onshore wind, tidal power and, for the first time, geo-thermal.”
“Offshore wind is central to our ambitions to decarbonise our electricity supply and our ambition to build 50GW of offshore wind capacity by 2030, including up to 5GW of floating wind, remains firm,” Stuart added.
Solar projects will deliver almost half of this year’s total capacity, while onshore wind accounts for 1.5GW, tidal projects make up 50MW and geothermal, 12MW.
Trade body Solar Energy UK reacted positively to the news that 56 solar projects were secured in AR5, with a total capacity of 1,928MW, an average 34MW per project. “The smallest is the 7MW Bracon Ash solar farm near Norwich, while the largest is an undisclosed 57MW project from Enso Green Holdings,” Solar Energy UK said, adding that the result was “rather better than had [been] anticipated, illustrating its resilience to economic turbulence compared to offshore wind, for which no bids were made.”
Solar’s strike price came in at £47 per megawatt-hour, with onshore wind at £52. Geothermal and tidal stream technologies secured contracts at strike prices of £119 and £198 respectively.
“We are pleased that so many solar projects have been successful in AR5, particularly as solar has only recently been able to participate. This shows how resilient solar has become to economic shocks. It remains the cheapest way to generate power in the UK. That said, we need to be roughly doubling the pace of solar installations to meet the government's capacity target of 70GW by 2035,” said Chris Hewett, chief executive of Solar Energy UK.
“CfDs are far from the only route to market for utility-scale solar. Some developers will prefer to sell on a merchant basis or seek a long term power purchase agreement. The AR5 results are therefore not a cap on deployment of solar farms and we are seeing record high rooftop solar installation in 2023,” Hewett added.
Another solar company, Low Carbon, also welcomed the AR5 results, having been offered CfDs for 10 solar projects with a capacity of more than 350MWp.
Steve Mack, Low Carbon chief executive, said: “these projects, coupled with more than 300MWp we secured in last year's auction, will play an important role in supporting the rollout of solar energy across the UK and provide investment certainty in the solar supply chain as we look to make further progress on reaching net zero. They will also make a material contribution to the UK’s energy security and cut bills for consumers, while creating further momentum for our own ambition of delivering 20GW of new renewable energy capacity by 2030.”
But wind energy groups were not so happy about the result. Keith Anderson, ScottishPower chief executive, said: “This is a multi-billion pound lost opportunity to deliver low-cost energy for consumers and a wake-up call for Government.”
Energy consultancy Cornwall Insight said “The lack of bids from offshore wind and bid prices at or close to the ASPs for onshore wind and solar PV, will no doubt prompt questions about the level and structure of support being offered by the government.”
Solar projects only became eligible for CfDs in AR4 which concluded in July 2022. 63 of the 93 projects supported in AR4 were solar PV. Solar Energy UK said that the results of the auction were “unbalanced”, and “the result of inflationary pressures on the renewables industry falling much harder on that sector compared to solar.”
