The Informer

This week's energy news headlines: The 4th round of the CfD scheme opens for applications for renewable developers to compete for a share of £285m of annual funding; The costs of the mechanism used to balance the grid have risen by almost 300% compared to last year; The shortfall across the Renewable Obligation schemes hits £218m after supplier failures.

  • ‘Landmark’ CfD round opens

    The biggest ever round of the UK government’s Contracts for Difference (CfD) renewable energy support scheme has opened to applications. Funding of £285 million a year is available in the fourth round of the scheme, which is aiming to secure 12GW of capacity - more renewable capacity than the previous three rounds combined. The additional offshore wind capacity resulting from the funding alone could generate enough electricity to power around 8 million homes. The chief executive of industry body RenewableUK, Dan McGrail, described it as a “landmark auction” for the sector. “Ministers have listened to our calls for the overall capacity cap to be lifted to reflect the enormous appetite among companies and investors in UK projects,” he said. Onshore wind and solar are competing in an allocation round for the first time since 2015, alongside offshore wind and tidal. Business and Energy Secretary Kwasi Kwarteng said the auction will “solidify the UK’s role as a world-leader in renewable electricity, while backing new, future-proof industries across the country to create new jobs”. Read more

  • Balancing Mechanism costs surge

    The cost of the UK’s Balancing Mechanism has soared by almost 300% compared to last year, according to new analysis. Consultancy LCP said that in the three months to the end of November, costs reached £967m, compared to the £337m seen in the same period in 2020. Analysis also reveals that the top 10 most expensive days in the mechanism have occurred over the past three months. For November alone, the average daily cost was £16.4m, an increase of 192% from 2020 and 756% from 2019.

    Rajiv Gogna, Partner at LCP Energy Analytics, said: “We have seen the perfect storm of low renewable generation and an increase in global demand for gas which has put the UK’s limited capacity on the edge, forcing prices to repeatedly break new ground. “This has resulted in record high balancing costs, which will feed through to suppliers via BSUoS charges at the worst time. With no mechanism to pass the increased cost onto customers, suppliers have had to tackle this huge cost increase from their already stretched balance sheets.” Read more

  • Renewables Obligation shortfall tops £218m

    Regulator Ofgem has said the total shortfall amount across all Renewable Obligation schemes for the last year stands at more than £218m. Of the suppliers who failed to comply by the 31 October late payment deadline, 25 are either in administration or have had their licence revoked. The shortfall means the mutualisation process has been triggered for the fourth year running. Under mutualisation, the shortfall is shared among those suppliers who have paid into the scheme. This year’s figure is up from the £33m owed the previous year. Ofgem also said it had paid a total of £58.57m to suppliers under a redistribution of the 2020-21 RO late payment fund. Suppliers received £3.87 per ROC presented after the redistribution of the buy-out fund. From the redistribution of the late payment fund, they have received an extra £0.55 per ROC. This means that the final recycle value for 2020-21 is £4.42. Read more

  • Green light for new interconnectors

    Regulator Ofgem is inviting bids for billions of pounds of investment in new electricity interconnectors. Ofgem said new subsea links would help boost energy security, achieve the country’s climate goals, and save money for energy consumers. There are currently seven operational electricity interconnectors, connecting Britain to Ireland, France, Belgium, the Netherlands, and Norway, and providing almost 7% of the UK’s electricity last year. The UK Government wants to more than double existing interconnector capacity in the medium term to support its target of quadrupling offshore wind capacity by the same date. To help meet that target next year’s investment round will favour projects able to complete by 2030. Project developers and consumers will benefit from Ofgem’s “cap and floor” regime. This sets a maximum ‘cap’ on revenues and a minimum ‘floor’ to ensure an adequate return for investors while keeping costs down for consumers. Akshay Kaul, Director of Networks at Ofgem, said: “Greater interconnection of energy across borders is vital to ensure resilience, affordability and sustainability in the future as we transform our energy system. “Our next investment round for interconnectors will bring forward the investment we need, creating green jobs and unleashing the full potential of the UK’s world leading offshore wind industry, while also protecting customers by capping costs.” Read more

  • Renewables accelerating ‘faster than ever’

    Global renewable electricity capacity is forecast to rise more than 60% by 2026 from 2020 levels, according to new figures. The 4,800GW expected to be in operation by then will be equivalent to the current total global power capacity of fossil fuels and nuclear combined, the International Energy Agency (IAE) report found. Renewables are set to account for almost 95% of the increase in global power capacity in the next five years, with solar PV alone providing more than half. The amount of renewable capacity added between 2021 to 2026 is expected to be 50% higher than from 2015 to 2020. The IEA said this would be driven by stronger support from government policies and more ambitious clean energy goals announced before and during COP26. Despite rising costs for key materials used to make solar panels and wind turbines, new renewable capacity this year is forecast to rise to 290GW, surpassing the previous all-time high set last year. IEA Executive Director Fatih Birol said: “This year’s record renewable electricity additions of 290 gigawatts are yet another sign that a new global energy economy is emerging. “The high commodity and energy prices we are seeing today pose new challenges for the renewable industry, but elevated fossil fuel prices also make renewables even more competitive.” Read more