Published 24 July 2014
Renewable energy projects to compete for a budget of over £200 million a
year, as part of reforms to the electricity market.
From October, renewable energy projects will compete for a budget of over
£200 million a year, as part of the government’s reforms to the electricity
market, Energy and Climate Change Secretary Ed Davey announced today.
The funding is for the first allocation round for the new Contracts for
Difference, which provide long-term certainty and reduce risk for
investors. The government’s reforms to the electricity market will reduce
emissions from the power sector much more cheaply than through existing
policies – around 6% (£41) lower on the average domestic electricity bill
up to 2030.
Mr Davey said that renewable energy projects would have to bid
competitively for the contracts, ensuring that new, clean electricity
generation would be built at the lowest possible cost to energy consumers.
We are signalling now that at least a further £50 million is planned for an
auction round in 2015, with a total of around £1 billion potentially
available later for further projects, including Carbon Capture and Storage,
up to 2020-21.
Mr Davey said:
“Our plan is powering growth and jobs as we build clean, secure electricity
infrastructure for the future. By radically reforming the electricity
markets, we’re making sure that decarbonising the power sector will come at
the lowest possible cost to consumers.
“Average annual investment in renewables has doubled since 2010 – with a
record breaking £8billion worth in 2013.
“These projects will create green jobs and green growth, reduce our
reliance on foreign-controlled volatile energy markets and make sure
billpayers get the best possible deal.
“We’re building a secure, low-carbon electricity system that will be the
powerhouse of the British economy, supporting up to 250,000 jobs by 2020.”
The funding is managed by the Levy Control Framework, which caps the cost
to consumers of renewable energy policies.
The new system is designed to bring more competition and encourage private
sector investment in low-carbon electricity generation. The budget estimate
comes after the European Commission confirmed yesterday that the Contracts
for Difference, Capacity Market schemes, and five offshore wind projects
supported by early Contracts for Difference, are in line with its rules on
state aid.
The CfD budget will be split between up to three technology groups – one
for more established technologies, like onshore wind and solar, and one for
less established technologies like offshore wind, and one for biomass
conversions. Within each group, contracts will be allocated competitively –
putting the UK in the forefront of driving down the costs of supporting
renewable technologies and delivering better value for consumers.
The reforms build on the UK’s status as one of the most attractive places
to invest in energy globally, supporting economic growth and creating jobs.
Notes to editors
This new budget is additional to the substantial amounts of support for
renewables already being spent under existing schemes (the Renewables
Obligation and small scale Feed in Tariffs) as well as on top of the
funding for the 8 Final Investment Decision enabling for Renewables projects.
This is an indicative budget and is subject to change by September when the
final budgets are confirmed.
Read the Government response to the consultation
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