A lot of CWP’s time of late has been spent looking at the Contracts for Difference Scheme and assessing how, or indeed if, this would roll out and what future strike prices might look like.
Back in November 2015 Amber Rudd indicated that there would be three more CfD rounds under this parliament with the first of these being towards the end of 2016. Rudd also indicated that these rounds would only take place if the government’s cost reduction requirements for Offshore Wind were met. It was our gut feeling, based on progress the offshore wind industry was making in cost reductions, that this could mean auction strike prices for offshore wind of £100/MWh or less come the next CfD round.
Yesterday’s budget finally put some figures to how much future CfD auctions could be worth. The Chancellor has now committed up to £730million over this parliament for up to 4GW of offshore wind and other less established technologies (including ACT, tidal stream, wave, AD). He also promised that the first auction, thought to be slated for November 2016, will have a value of £290million. The government will control costs by capping offshore wind strike prices at £105/MWh (2011-12 prices), falling to £85/MWh for projects commissioning by 2026 and this is broadly in line with our thinking on strike price levels.
No mention was made in the Budget as to what support more established technologies (onshore wind, solar etc) can expect but perhaps this will be dealt with in the autumn when the government will make further announcements on CfD – hopefully by publishing a new CfD Allocation Framework to kick off a November 2016 round.
Read the full budget here.