Solar PV projects could receive up to £295 million in government support through the upcoming Contracts for Difference (CfD) allocation round 7 (AR7).
Announced yesterday that the budget for AR7 has been split into AR7 and AR7a; AR7a is the auction for all renewable technologies except offshore wind, which has its own auction in AR7.
AR7a has a total budget of £310 million, which would be the maximum support the government would pay to renewable energy producers if wholesale electricity prices fell below a certain threshold.
The technologies in AR7a are split into two ‘pots’, with Pot 1 containing projects using established technologies, and Pot 2 containing emerging technologies.
Pot 1 has allocated £295 million, and Pot 2 has £15 million. The administrative exercise price, the maximum amount per kilowatt that the government will pay, was set in July. For solar energy the The administrative exercise price is £75/MWh.
Under changes to the CfD scheme announced earlier this year, solar, onshore wind and remote island wind will all receive 20-year contracts, an increase from previous rounds where 15-year contracts were awarded.
The prices are shown in 2024 figures, an update from previous rounds using 2021 prices.
In the previous CfD round, AR6, there were clearing prices for solar PV and onshore and offshore wind granted at more than 18% below the administrative exercise price. The bid ceiling for solar energy is lower this year than last year.
Commenting on the budget announcement, head of energy at the Energy and Climate Intelligence Unit (ECIU) Jess Ralston pointed out that it is “very unlikely that the so-called budget will be added to the accounts”, noting that the prices set are based on “outdated estimates for future energy prices that are very different from expert forecasts, which the Treasury has not gone far in updating in recent years”.
The budget for the AR7 offshore wind auction power was set at £1 billion in October.
Ralston added: “UK wind and solar already reduce the cost of wholesale electricity by around a quarter, or £25/MWh, and will continue to drive down prices as more are built to replace older, less efficient gas-fired power stations.”
In any case, to meet the capacity objectives set out in the Clean Power 2030 Action Plan (CP30). 12GW must be secured in AR7AR8 and possibly, depending on the speed of implementation, AR9.
The application window for AR7 opened in August and runs on the longest or slowest timescale it could have, with a closed bidding window that would take place between January 5 and 9 and the publication of results between February 6 and 9.
