United Kingdom

United Kingdom

Phased-project cap set for second UK auction

UK: Framework rules for the UK's second contracts for difference (CfD) auction, set to open in April, states projects to be completed in phased developments must not exceed 1.5GW.

UK's offshore wind projects will be competing for £290 million in the next CfD auction (pic: MHI Vestas)
UK's offshore wind projects will be competing for £290 million in the next CfD auction (pic: MHI Vestas)

The rules were laid out by the Department of Business, Energy and Industrial Strategy (BEIS) in early February.

BEIS said the first phase of multi-development projects should be at least 25% of the total capacity and must be completed by 31 March 2023.

The full project must also be completed within two years after the deadline of the first phase, BEIS added. 

This move would mean Dong Energy's 1.8GW Hornsea Project 2 site, should it successfully bid in the forthcoming auctions, would need to be installed as a single 300-turbine phase. 

In November 2016, BEIS announced £290 million (€340 million) would be available in the next CfD auction, which will support less-established technologies such as offshore wind, waste-to-energy, wave, tidal, geothermal and biomass.

Projects will have two delivery years: 2021/22 or 2022/23. Offshore wind projects with delivery for 2021/22 will have a maximum strike price of £105/MWh (in 2012 prices). Sites planned for the later delivery period will have a strike price if €100/MWh.

Due to the nature of a CfD auction, offshore projects will be expected to bid lower than the strike prices. In the first auction round in 2015, offshore wind prices were around 20% lower than the set strike price.

In an interview with UK newspaper the Guardian, RenewableUK chief executive Hugh McNeal said he "wouldn't be surprised" if offshore wind projects bid lower than the £92.50/MWh price agreed for EDF's Hinkley Point C nuclear plant in 2013. 

The contract at Hinkley will provide top-up support over 35 years, compared with the offshore wind CfD's 15-year duration.

The £730 million set aside by the UK government in November 2015 for a total of three CfD auctions remains in place to be used by 2020.

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