Climate Action

Energy trade association push Government to make important changes to annual clean power auction

The energy industry urges the government to reform clean power auctions to lower energy bills by maximizing private investment in renewable technologies.

  • 07 July 2023
  • Press Release

The energy industry urges the government to reform clean power auctions to lower energy bills by maximizing private investment in renewable technologies.

Three energy trade associations, RenewableUK, Energy UK and Scottish Renewables, have written a joint letter to the Secretary of State for Energy Security and Net Zero Grant Shapps, urging the Government to make urgent changes to their annual clean power auctions, known as Contracts for Difference (CFDs).

The trade bodies have put forward a series of recommendations to lower energy bills by maximising private investment in renewable technologies, while also ensuring that we grow industrial supply chains throughout the UK, creating tens of thousands of high-quality well-paid jobs.

In the letter, the trade bodies state: “Jointly we believe that a broader approach is needed in defining how best value is delivered from Allocation Round 5 (AR5) onwards for the industry and consumer. This should take account of the current economic environment, international competition in the sector and the benefits to UK plc from the timely deployment of homegrown, cost-effective renewable energy”.

The energy trade association has put forward three recommendations to address the issues. These include reassessing and uplifting the budget for this summer’s auction (AR5). The budget for fixed-foundation offshore wind alone would need to be at least two and a half times higher than its current level to maximise the capacity which could now be secured in this year’s auction. Further suggesting that fixed-foundation offshore wind should be put back into a separate budget pot to maximise deployment.

The second measure in the letter focuses on the essential efforts to support emerging technologies such as floating wind and tidal stream projects, to accelerate cost reductions and build up supply chains. This can be achieved by setting clear deployment targets and ringfencing budgets for each technology, to ensure that each secures a minimum amount of new capacity.

The third recommendation urges Ministers to ensure that in future auction rounds, CfD parameters should reflect their economic environment more closely in terms of supply chain costs and interest rates. The letter notes that the methodology used to date has not provided enough transparency or reassurance to developers that changing economic circumstances will be factored appropriately into the auction process. A clear schedule with auction parameters, budgets and capacity targets would provide a clear roadmap towards net zero.

RenewableUK’s Executive Director of Policy and Engagement Ana Musat said: “The parameters set by the Government for this summer’s clean energy auctions are incredibly tight, and could even fail to unlock investment in shovel-ready renewable projects. Time is running out, not only to secure new renewable projects in the coming months but also to set up a framework for the rest of this decade to ensure that longer-term investments in manufacturing come to the UK instead of going overseas”.  

Find out more here.