London announces more than £1.5 billion for its sixth Contracts for Difference auction (CfD). Energy Secretary Miliband: "It's the biggest budget ever"
The budget for offshore wind power with a fixed foundation exceeds the billion
The new British government is pushing the accelerator of the energy transition. Yesterday, London announced the budget of the sixth record auction for UK renewable energies, and the figure has left many to open their mouths. £1.5 billion, equivalent to €1.18 billion, with an increase of over £500 million over the previously planned budget. And with extensive resources dedicated to offshore wind power.
Energy Secretary Ed Miliband explains: “Last year’s auction was a disaster, as no offshore wind energy source was guaranteed and it delayed our transition from expensive fossil fuels to energy independence. […] This year’s auction got the biggest budget ever. This will make the UK once again a global leader for green technologies and provide the infrastructure we need to increase our energy independence, protect taxpayers and become a clean energy superpower.”
The sixth auction for renewable energy UK
The sixth for renewable energies UK presents the same breakdown in intervention categories announced in March 2024, but retouches the figures allocated. For the “consolidated technologies” group, such as photovoltaics and wind power on the ground, there are now £185 million for future contracts by difference (CfD); for the “emerging technologies” group, such as floating offshore wind and tidal exploitation plants, £270 million; For the third group dedicated to the classical offshore wind, the resources of the CfD amount to £1.100 million.
“It’s great to see the government choosing to unlock more investment in renewable projects by increasing the budget for the next Contracts for Difference auction,” commented Dan McGrail, CEO of Renewables UK. “These new wind and solar power plants will improve our energy security, drive economic growth, support thousands of new green jobs, and ensure that we continue to create a low-cost electricity system for taxpayers.”
What are differential contracts?
A Contract for Difference (CfD) is a private law contract between a low-carbon electricity producer and the Low Carbon Contracts Company (LCCC), a British government-owned company.
CfDs guarantee a fixed price for electricity, known as the operating price, that plants receive per unit of electricity produced.
When the market price of electricity is lower than the operating price established in the contract, the LCCC pays the difference to the plant owner. However, when the market price exceeds the operating price, the plant owner pays the difference to the LCCC.
“The 2-way design of the scheme also protects consumers and businesses from future uncertainty on the global energy market,” the UK government writes. “This is because when wholesale electricity prices are higher than the agreed CfD price, generators pay back into the scheme which is then passed back to billpayers.”
In the sixth UK renewable energy auction the maximum operating price is:
- wind power offshore 73£/ MWh;
- wind power onshore 64£/ megawatt;
- solar 61£/ GWh;
- floating offshore wind power 176£/ MWh;
- geothermal £157/MWh;
- tides £261/MWh.
