More than a dozen new onshore wind farms are to receive financial backing through the coalition government’s reformed renewable incentive scheme, along with two offshore wind projects and five solar farms.
The contracts for the new renewable energy projects amount to more than £315m in total, spread across five renewable technologies, and taken together should produce more than 2GW of new generation capacity, enough to power 1.4m homes.
But green campaigners and parts of the renewable energy industry were disappointed by the auction process used to award the contracts, arguing that some technologies and projects had lost out in the reforms.
The support for onshore wind comes even as the Conservatives have promised to cut or abandon subsidies for the technology, with David Cameron saying people have been “fed up” with turbines on land. It is not clear how the projects could be affected if a Conservative government is re-elected in May.
Ed Davey, the Liberal Democrat energy secretary, said: “These projects could create thousands of green jobs and give a massive boost to homegrown energy while reducing our reliance on volatile foreign markets.”
However, the solar power industry was quick to point out the sizeable difference in the number of wind projects awarded contracts compared with solar schemes. Solar farms tend to be brought forward by smaller companies, which lack the financial muscle to compete against big players, whereas many wind farms are championed by large international energy utilities.
Paul Barwell, chief executive of the Solar Trade Association, said: “Unfortunately, this result is as disappointing as we predicted. The soon-to-be cheapest and most popular renewable – solar – has lost out in a complex auction that favours big players and genuinely established technologies. It is essential that changes are made to the next round of auctions in October to ensure that smaller UK solar companies have the confidence to enter.”
Richard Dixon, of Friends of the Earth Scotland, said offshore wind had also received less support than it should have, given the potential of the technology. “These results are very disappointing [with only two offshore wind farms supported showing] how little interest the current government has in cleaning up our energy supply. Today is another nail in the coffin of the coalition’s claim to being the greenest government ever.”
Under the coalition’s electricity market reforms, large renewable energy projects no longer receive direct subsidies funded by the electricity bill-payer. Instead, they compete in auctions for “contracts for difference”, by which they undertake to generate a certain quantity of energy replacing what would otherwise have come from fossil fuels.
Davey said the auctioning mechanism had driven down the cost to billpayers of generating more low-carbon electricity. The Department of Energy and Climate Change has estimated that the projects will cost £110m less in bill-payer support than they would have done without the auctions.
Each renewable technology in the competition was awarded a guide “strike price”, which set the maximum support available. But all the forms of renewables represented, apart from energy from waste, came in at substantially less than the strike price.
This was in marked contrast to the strike price for nuclear power, which will result in one nuclear reactor being built – at Hinckley in Somerset, by the French state-backed utility EDF – for £80bn calculated on the strike price alone. Solar power, which has seen costs plummet as worldwide use of panels has risen, settled for 58% lower, with offshore wind 18% and onshore wind 17% under their respective strike prices.
Davey said the way the reforms operated would result in 550MW more renewable generation capacity being built than would have happened without the competitive mechanism.
He also said that small generators had been among the project developers bidding successfully for the contracts, in a nod to renewable experts who feared small companies would be the biggest losers under the reformed scheme.
Jim Watson, research director of the UK Energy Research Centre, said falling prices were a positive consequence of competition but warned that past auctions had encouraged underbidding and fanfare over low prices should remain tempered until the proposed projects are realised.
“In a sense it shows that this competitive process of getting companies to bid in against each other in an auction is working,” said Watson. “Whether these successful bidders have bid too low in their eagerness to get the contract only time will tell. In the 1990s when we used to have auctions for renewables we got a lot of low bids but a number of the companies couldn’t actually build the projects because they bid too low.”
In response to the first Contracts for Difference auctions for renewables, Greenpeace Chief Scientist Dr Doug Parr said: “Today’s announcements show renewables’ costs are plummeting, and will mount a growing challenge to conventional sources of power in delivering energy security for the UK.
“Those who say we should tackle climate change but are opposed to wind and solar farms need to explain how they plan to cut carbon emissions whilst keeping consumer bills as low as possible.
“We’ve known onshore wind is much cheaper than nuclear for a while, but now we learn that solar power is already cheaper than new gas generation in some cases. It makes you wonder what could have been achieved with less party-political manoeuvring and more stable Government support for the clean technologies already being embraced by the world’s largest economies.”