Sep 8 (Renewables Now) - It is possible for the UK government's second contracts for difference (CfD) auction to back around 5 GW of offshore wind if prices fall to as low as GBP 65 per MWh.
This is according to an analysis presented in a blog post today, in the run-up of the auction results announcement on Monday, by Gavin Smart, head of insights at the UK's Offshore Renewable Energy (ORE) Catapult. According to the analysis, projects with capacity of above 3 GW are expected to bid in the auction and there are pricing scenarios in which the entire capacity eligible to compete could be successful.
The auction offers an annual budget of GBP 290 million (USD 383m/EUR 318m) for delivery years 2021/22 and 2022/23 and the analysis seeks to estimate how much capacity this budget can support. Up to 5 GW is possible if offshore wind wins all, but as the auction is open to other less established technologies, such as wave and tidal energy, part of the budget could go to other projects.
Actually, there are many variables to take into account, but still a range of 2.4 GW to 5 GW of offshore wind is seen as affordable within the budget.
At the administrative strike price of GBP 105 per MWh for projects to be delivered in 2021/22, the available budget could support 1.3 GW of offshore wind, according to the estimates. The expectations are that prices will fall well below that ceiling, though, with various estimates in the range GBP 65 to GBP 90 per MWh.
(GBP 1 = USD 1.321/EUR 1.095)