Study says increased CfD competition to bring more savings for UK

The UK could save GBP 600 million (USD 917m/EUR 825m) a year and still meet its 2020 renewable energy targets by allowing direct competition between different technologies for the Contracts for Difference (CfD) budget, a study claims.

The research was ordered by UK solar farm developer Green Hedge Renewables, which called for changes in the CfD mechanism. "Reforming the system to make it technology neutral, or at least limit the amount earmarked for more expensive technologies, should be a priority before the next auction," said Green Hedge Renewables managing director Niels Kroninger.

The UK Department of Energy and Climate Change (DECC) announced the winning projects in the country's first CfD auction in February. Funding was allocated across two pots -- GBP 65 million for established technologies such as onshore wind and solar and GBP 260 million for less established technologies such as offshore wind and some biomass technologies.

The announcement says that while CfD auctions introduce competition to reduce government support for renewables, earmarking 80% of the overall budget for more expensive technologies means that consumers "overpay significantly."

According to the study, conducted by Baringa Partners, if the barrier between established or cheaper and less established or more expensive technologies was removed, the first CfD auction would have led to 3.68 GW of winning projects, compared to 2.14 GW in the actual auction. Extrapolating this to future annual auctions to 2020, the study claims that the government would be able to cut the annual CfD budget by more than GBP 600 million, from GBP 1.35 billion to GBP 719 million, and still achieve the 2020 renewable energy goals.

According to the study, if the government wants to favour some technologies and limit their funding to 35% of the overall budget, there would still be GBP 590 million of budget savings.

"We expect solar farms bidding for CfDs at or below the wholesale market price by 2020, which shows that ground-mounted solar power without subsidies can happen over this parliament," said Kroninger.

(GBP 1.0 = USD 1.529/EUR 1.375)

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