Contracts for Difference renewable energy support scheme backed by additional £265m

Open to projects operating in Great Britain, the Contracts for Difference (CfD) scheme is the UK Government’s primary method of encouraging investment in low-carbon electricity. It is open to projects operating in Great Britain.

It incentivises investment in renewable energy by providing developers of projects with high upfront costs and long lifetimes with protection from volatile wholesale prices. This in turn ensures consumers don’t pay increased costs when electricity prices are high.

A total of £265 million per year will be provided to businesses in the fourth round of the scheme, which aims to double the renewable electricity capacity secured in the third round and generate more than the previous three rounds combined. The additional offshore wind capacity resulting from the funding alone could power around eight million homes.

Today’s announcement contains £200m to support offshore wind projects. There will also be £55m available for supporting emerging renewable technologies, £24m of which is ringfenced for floating offshore projects for the first time.

For the first time since 2015, established technologies, including onshore wind and solar, will also be able to bid. The Government is seeking up to 5GW of capacity from these technologies, with a £10m budget. This will support investment in all parts of Great Britain, particularly Scotland and Wales.

The previous round of the CfD scheme delivered record-low prices and secured enough clean energy to power over seven million homes. The scheme’s competitive design also protects consumers and thanks to the investment of successive governments the price of offshore wind has been reduced by around 65%.

Energy minister Anne-Marie Trevelyan said: “The Contracts for Difference scheme has helped the UK become a world leader in clean electricity generation and lowered prices for consumers.

“The new plans set out today deliver on the Prime Minister’s Ten Point Plan and will support the next generation of renewable electricity projects needed to power our homes and meet our world-leading climate change targets.”

CfD contracts are allocated through a competitive auction process where the cheapest projects in each technology group are awarded contracts first.

Pot 1: Established technologies (includes Onshore wind, Solar and Hydropower):

• £10m pot budget
• Cap of 5GW on total capacity
• Maximum capacity limits of 3.5GW imposed on both onshore wind and solar PV

Pot 2: Less-established technologies (includes Floating Offshore Wind, Tidal Stream, Geothermal and Wave):

• £55m pot budget
• No capacity cap imposed
• £24m ringfenced support for floating offshore wind projects

Pot 3: Offshore wind:

• £200m pot budget
• No capacity cap

Responding, Claire Mack, chief executive of Scottish Renewables, said: “This auction comes at a crucial time for the UK’s climate leadership and I’m very pleased to see that greater renewable capacity will be unlocked by what is being set out today, particularly recognising Scotland’s offshore expertise and ambition.

“While we are pleased that a balanced range of technologies will be supported, we are concerned that as little of 1.5GW of onshore wind could be secured, which would fall far short of what is needed to meet net-zero goals. We were also hoping that more ringfenced support would be offered to our impressive tidal sector, which stands ready to demonstrate its’ growth potential by deploying at the next level of commercial scale.”