The Contracts for Difference (CfD) regime was introduced by the UK government in 2014, and replaced the Renewable Obligation (RO) scheme (except to the extent that RO is still operating for those renewable energy generators that signed up to the scheme before it closed, as the payments are guaranteed for the length of the period agreed under that scheme).
As the Government’s websitei makes clear:
The Contracts for Difference (CfD) scheme is the government’s main mechanism for supporting low-carbon electricity generation.
CfDs incentivise investment in renewable energy by providing developers of projects with high upfront costs and long lifetimes with direct protection from volatile wholesale prices, and they protect consumers from paying increased support costs when electricity prices are high.
Renewable generators located in the UK that meet the eligibility requirements can apply for a CfD by submitting what is a form of ‘sealed bid’. There have been 3 auctions, or allocation rounds, to date, which have seen a range of different renewable technologies competing directly against each other for a contract.
Successful developers of renewable projects enter into a private law contract with the Low Carbon Contracts Company (LCCC), a government-owned company. Developers are paid a flat (indexed) rate for the electricity they produce over a 15-year period; the difference between the ‘strike price’ (a price for electricity reflecting the cost of investing in a particular low carbon technology) and the ‘reference price’ (a measure of the average market price for electricity in the GB market).
Eagle-eyed observers of the BBC’s website may have noticed an articleii written by Roger Harrabin that appeared there on 9th February 2022. It carried the title: “Renewables auctions to be held annually in green energy push”.
In the past, allocation rounds (ARs) for CfDs have been held broadly every two years, with AR1 running from October 2014 to April 2015; AR2 running from March to September 2017); AR3 running from May to September 2019); and AR4 opening to applications on 13th December 2021. And, according to a Business Statementiii issued to Parliament by Kwasi Kwarteng on 9th February 2022, AR5 is to be brought forward to March 2023.
And now, as the BBC tells us:
The government has re-stated its faith in green technologies with a decision that it says will create a steady stream of renewable energy projects.
Energy Secretary Kwasi Kwarteng says renewable power is the best way to shield the UK from volatile gas prices.
He announced that auctions to supply low-carbon electricity will now happen every year, instead of every two.
He says this will bring more certainty to firms planning to invest in wind turbines and solar panels.
The renewables industry is delighted…
I should think it is. This has proved a nice little earner (or, more precisely, rather a big earner) for the industry since its inception. Those who would have you believe that renewables aren’t subsidised should reflect on why there is such delight on the part of “Big Wind”.
One has to hope that a comment made by the Secretary of State towards the end of his Parliamentary Statement is significant, and that somebody is keeping an eye on “the wider system, including total system costs”:
As more renewables are added to the system, we will continue to consider how the scheme could evolve over the longer term to ensure it reflects the impact of renewables on the wider system, including total system costs.
It would be nice to think that, at last, there is a recognition that unreliable and unpredictable renewable energy greatly adds to the “total system costs” and that, better still, those costs are allocated to those responsible for them, namely the renewable energy companies. That would also help to level the playing-field, and ensure that claims about “cheap” renewables are held up to the glare of full publicity of the overall costs implications they have for the wider system.
Press Release
On the other hand, the associated press releaseiv does give cause for some concern. While I appreciate that the whole point of a press release is to obtain publicity and drum up support for a new initiative, I think when we are talking of a Government press release it should be more substantial than the sort of “advertising puff” one might expect of a business, and it should be scrupulously accurate in all that it claims. In this case, I have a concern that Government ministers believe their own publicity.
For instance, it begins like this:
The rollout of low-cost renewable energy in the UK will be accelerated as the government ramps up auctions for its flagship renewables scheme to boost investment and jobs.
That immediately raises a number of controversial questions. By referring to “low-cost renewable energy” it obviously seeks to undermine claims that the expensive and unreliable renewable energy we are increasingly being forced to rely upon is in any way behind the current energy price crisis. In doing so, it conveniently ignores the fact that the early rounds of CfD provided very high prices for renewable energy companies, and that they are generally locked in for 15 years. Thus high costs are baked in (to use a phrase much loved of green lobbyists) to the system until 2030 and beyond, but nobody in Government seems to want to talk about that. As for boosting investment and jobs – where are the jobs? Point them out: if all this is as successful as claimed, it shouldn’t be too difficult.
A little further on we read this:
CfDs are the government’s primary method of supporting renewable energy, driving down the cost of technologies and playing an important role in leveraging £90 billion of private investment by 2030.
Where does that figure of £90 billion come from? It’s an aspiration, but there is no guarantee that it will be achieved. It’s a pity that Government press releases aren’t fact-checked by the BBC’s “misinformation correspondents” or subject to the jurisdiction of the Advertising Standards Agency or Trading Standards-style laws.
Next:
The auction scheme has already proved successful at bringing down the per unit price of offshore wind by around 65% since the first auctions were held – helping the UK become one of the world’s largest generators of wind power.
It is gratifying that costs are coming down, but they are coming down from a very high starting point, and, as mentioned above, they don’t take into account the costs of destabilising the National Grid. Perhaps it wouldn’t be appropriate for a Press Release, but a footnote with a link to a handy website where the actual costs can readily be seen might have been nice.
Here we go again:
In the last allocation round, new contracts were awarded, with the potential for nearly 6GW of further capacity. This is enough to power over 7 million homes at record low prices and could see the creation of thousands of jobs across the UK.
This is just smoke and mirrors, and not worthy of a serious communication. “Potential”, “nearly” and “power over 7 million homes” combine weasel words with something close to active deception. Homes can be said to be “powered” if that power is reliable and constant, which renewably-generated power most certainly isn’t. The Government shouldn’t be using the same sharp advertising tactics of renewable companies. It should be telling its people the clear, straightforward, unadulterated truth. As for “could see the creation of thousands of jobs across the UK” I fear this is wishful thinking. Without firm legal commitments to create long-term well-paid jobs for UK citizens, then this amounts to little more than spin.
Disappointingly, perhaps for want of anything else to say, this paragraph is simply repeated further down the press release.
I don’t know what others feel, but I’m not sure that quotes from business people should appear in a Government press release, but that’s what has happened here, with quotes from Dan McGrail, Chief Executive of RenewableUK and Morag Watson, Director of Policy at Scottish Renewables. It all just feels a little too cosy. As for Morag Watson saying this:
The Contracts for Difference mechanism plays a central role in facilitating that, and increasing the frequency of auctions is essential if we are to tackle climate change.
I am far from convinced that the hubristic claim that “we” can “tackle climate change” should be allowed. With UK emissions representing around 1% of global emissions that are rising, not falling, it is simply wrong, in my opinion, to talk as though “we” can do anything at all about climate change by reducing our emissions. This idea that it’s all down to us and that we can do it is, frankly, ridiculous. The language of all concerned should be moderated to reflect the global reality.
Finally, the press release contains this little gem:
The share of coal free electricity generation in the whole of 2020 increased by 41.9% (5,202 hours) compared to 2019 (3,665 hours).
I wonder why they didn’t mention 2021’s lousy statistics?
Postscript
Perhaps the next CfD ARs should stipulate the exclusion of certain wind turbine manufacturers, unless the story reported by the BBC (Giant wind turbine collapse to be investigatedv) turns out not to be their fault? In fact, why not stipulate that all turbines to be used under any CfDs must be manufactured in the UK using materials also manufactured in the UK? Or would the UK’s expensive energy render low CfD bids unfeasible in that case…?
Endnotes
i https://www.gov.uk/government/publications/contracts-for-difference/contract-for-difference
ii https://www.bbc.co.uk/news/science-environment-60325908
iii https://questions-statements.parliament.uk/written-statements/detail/2022-02-09/hcws600
iv https://www.gov.uk/government/news/government-hits-accelerator-on-low-cost-renewable-power
Climate Scepticism 
“I wonder why they didn’t mention 2021’s lousy statistics?”
I know, I know ….
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Joe Public, thanks for that – it rounds the article off nicely. 🙂
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Sceptics have sometimes alleged that the current low strike price CfDs are merely bookmarks, and that the generating company intends to terminate the contract and sell at the market rate. (I am sure the market rate presently exceeds the strike prices that had certain folk gushing about how cheap wind was etc.) The penalty for exit is said to be low, but I don’t know what it is, nor where it is written. I have searched for it in the CfD standard terms and conditions, which runs to over half a thousand pages of almost English, but have had no luck there.
We may find out when the first company backs out of its commitment to supply at these rock bottom CfDs, if our media dares to report it.
The standard terms and conditions and generic contract are at this page, if anyone does not have a wall to watch paint drying on: https://www.gov.uk/government/publications/contracts-for-difference-cfd-allocation-round-3-standard-terms-and-conditions
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Jit, thanks also for that very valid and pertinent comment.
I have heard the same view expressed, and the article took longer to produce than I intended, because I spent many a long hour searching for evidence of the termination provisions in CfDs – long, fruitless, hours as it turned out. Like you, despite trawling the website relevant to CfDs, I simply couldn’t find anything about it. I wonder why that should be? Time, and time alone, will tell how all this works out.
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Per unit price has come down by about 65 percent? What is that in “shitloads”?
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I have just posted this comment at “Where Did All The Green Jobs Go?”
cliscep.com/2021/09/08/where-did-all-the-green-jobs-go/#comment-114645
I’m drawing attention to it on this thread too, because it rather contradicts the Government press release I referred to in this article, with its grandiose claims about “green” jobs. And after all, isn’t the ONS part of the Government, or at least part of the official paraphernalia? The ONS website report is here:
https://www.ons.gov.uk/economy/environmentalaccounts/bulletins/finalestimates/2020
[Link to the comment fixed Mark. I put the following duplicate comment into ‘Pending’. — Richard]
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Should anyone be interested in the minutiae of the AR process for CfDs, a look at this website will demonstrate just how bureaucratic and complex and slow the whole process is (at least in terms of AR4):
https://www.cfdallocationround.uk/longest-timeline
Perhaps the jobs of the people overseeing the process can be described as “green jobs”. Goodness knows, in view of today’s news about the lack of them, they need to magic some up from somewhere.
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I have always been a tad sceptical of all the green jobs to be created by renewables. You see I was wrongly under the impression that these jobs would be for athletic types needed to shin up the wind turbines for annual inspections. But perusing the Contracts for Difference document provided by Jit: 16 FEB 22 AT 8:43 AM I fully realise the abundance of jobs it will create. Admittedly not the sort of job I would aspire to, or even opt for instead of having my teeth extracted without anaesthetic, but jobs aplenty nevertheless. The document is 542 pages long of which over 60 pages are definitions. Yet one definition is missing. What is Contract for Difference CfD?
Clearly these are not jobs for Climate Scientists as they do not have clear definitions for anything.
Click to access AR3-Standard-Terms-and-Conditions.pdf
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The latest CfD Stakeholder Bulletin has been released, and tells us things like this:
“The non-qualification review assessment window is now open. National Grid ESO will assess any non-qualifying applications that were submitted for review by 25 March 2022.
National Grid ESO informed all Allocation Round 4 (AR4) applicants of the outcome of their application following the qualification assessment window, which concluded on 25 February 2022.
Between 28 February and 4 March 2022, any applicants that did not qualify could submit a request for National Grid ESO to review its decision.
National Grid ESO will review the relevant applications by 25 March 2022.
Once the non-qualification review assessment window is complete, any decisions that are upheld may be appealed.
Applicants that remain non-qualifying following National Grid ESO’s determination may submit an appeal to Ofgem for a decision. Requests for appeals should be submitted from 28 March to 1 April 2022.
If the review finds that all relevant applications qualify for AR4, National Grid ESO will notify applicants whether an auction is required and, if so, invite the submission of sealed bids. This will happen by 5 April 2022 if all applications qualify following the review.”
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The AR4 update has just been issued, as follows:
“Allocation Round 4 update
The appeals submission window is now open and will close on 1 April 2022 at 5pm.
National Grid ESO informed relevant Allocation Round 4 (AR4) applicants of the outcome of their non-qualification review result on 25 March 2022.
Applicants that remain non-qualifying following National Grid ESO’s determination may submit an appeal to Ofgem for reconsideration. Requests for appeals may be submitted from 28 March to 1 April 2022.
If any appeals are submitted during this window, Ofgem will consider them between 12 April and 12 May 2022.”
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I could have posted this under Greenhouse Gassing (since it’s a conference organised by the people I wrote about there), but since it’s about CfDs, I’ll leave it here:
“Next steps for the Contracts for Difference Scheme – Innovation across renewables, Supply Chain Plans, and assessing the future market outlook
Morning, Friday, 15th July 2022”
Areas of discussion include:
Allocation Round 4 – what has been learned – what can be applied going forward
Holistic Network Design – scope – development priorities for offshore wind projects
supply chains resilience – improving Supply Chain Plans – efficiency – infrastructure priorities – commercialising emerging technologies
market reform and development – outlook – balancing competition and accessibility – reducing costs of technology – support for rapid and sustainable low carbon scale-up
role in wider policy ambitions – energy security and costs – net-zero objectives – increasing home-grown supply – reducing exposure to volatile international markets
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Another technical update to the CfD allocation programme:
This one runs to 69 pages:
Click to access CMP308%20Decision_0.pdf
This is the short version:
“Ofgem has announced today that from 1 April 2023 generators will no longer pay Balancing Services Use of System (BSUoS) charges.
The announcement follows the outcome of a consultation that sought views on proposed changes to the way the charges are collected from electricity network users.
Ofgem will implement the decision by modifying the Connection and Use of System Code (code modification CMP308).
For successful projects in Allocation Round 4 (AR4) that would otherwise have been liable to pay the charges, today’s announcement means that their strike prices will be adjusted downwards after contracts are awarded. The adjustment will be applied from 1 April 2023 to coincide with Ofgem’s decision taking effect.”
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Paul Homewood has already posted this in full at his place, and I’ll provide a link to his website below, but the direct link to the original story is here:
https://www.gbnews.uk/news/wind-farms-earn-hundreds-of-millions-more-from-energy-crisis-after-delaying-government-subsidy-contract/285252
And at Paul’s place:
https://notalotofpeopleknowthat.wordpress.com/2022/05/02/wind-farms-earn-hundreds-of-millions-more-from-energy-crisis-after-delaying-government-subsidy-contract/
It’s relevant here, given that part of the discussion has been about how loosely CfDs are drafted, and how easy (or otherwise) it is for the commercial partners (the energy companies) not to honour their terms in full or at all. This story casts a little light on that, and the story it tells isn’t good.
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While CfDs allow energy companies to play fast and loose, and the Government begs them to “play fair”, meanwhile the bureaucrats are having a whale of a time. I don’t pretend to understand it, let alone to think that any of it will do much if anything to protect the end users – us, the paying customers:
https://www.gov.uk/government/consultations/contracts-for-difference-cfd-proposals-for-changes-to-supply-chain-plans-and-cfd-delivery
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Latest update regarding CfD AR4:
https://www.cfdallocationround.uk/news/allocation-round-4-update-appeals-process-completed
Also:
“Webinar: Initial Conditions Precedent
• Date: Thursday 7 July 2022, 10.00am–11.00am
Join the Low Carbon Contracts Company (LCCC) for this webinar on the Initial Conditions
Precedent (ICP) process in AR4.
LCCC is the Contracts for Difference (CfD) counterparty and one of the four CfD delivery partners.
In this webinar, LCCC will provide guidance on the ICP, the first contractual requirements after
signing a CfD. This webinar is therefore particularly relevant for AR4 applicants.
The webinar will take attendees through the three components of the process – Legal Opinion,
Know Your Customer and Facility Description – and provide an opportunity to ask questions”
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Don’t they keep telling us that Contracts for Difference are driving down costs and saving us money? Strange, then, that the latest update for AR4 says this:
“From: Secretary of State for Business, Energy and Industrial Strategy
To: National Grid Electricity System Operator Limited, EMR Delivery Body
This notice is given pursuant to Regulation 12 of the Contracts for Difference (Allocation) Regulations 2014
(as amended). A copy of that regulation is included in Schedule 2 to this notice.
This notice applies to the fourth Contracts for Difference (CfD) Allocation Round, as established by the
allocation round notice given by the Secretary of State on 25 November 2021.
CfD Budget
1. The Budget for CfD Allocation Round 4 (as set out in the Budget Notice given by the Secretary of State
on 25 November 2021) is revised as follows-
(a) The overall budget available for the Delivery Years, 2025/26 and 2026/27, and for the Valuation
Years 2027/28 and 2028/29, is increased by £10m for each of these years;
(b) The budget increase described in (a) applies only to the Pot 3 budget, so that the budget for Pot
3 for the Delivery Years, 2025/26 and 2026/27, and for the Valuation Years 2027/28 and
2028/29, is increased by £10m to £210m for each of these years.”
Click to access cfd4-allocation-budget-revision-notice.pdf
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The wheels grind slowly, but we now have another update on AR4:
“Allocation Round 4 update: Allocation process
The sealed bid window has closed, and National Grid ESO will now run the allocation/auction process.
The allocation process will be followed by an independent audit.
Subject to the outcome of the independent audit, the next update will be on 7-8 July 2022, once qualifying applicants have been informed of the results of the auction.”
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From Wind Energy’s Absurd today:
“Bells and a good sprinkling of fairy dust today as the Government announces the results of the 4th round of Contracts for Difference.
Kwasi Kwarteng – Business Secretary: ‘Eye-watering gas prices are hitting consumers across Europe. The more cheap, clean power we generate within our own borders, the better protected we will be from volatile gas prices that are pushing up bills.’
Greg Hands, Energy Minister: ‘ This fourth round shows the government’s Contracts for Difference scheme continues to be a roaring success.’
Melani Onn, Unreliables Deputy CEO: ‘Thanks to the rapid construction times of new onshore wind and solar sites, billpayers will start to feel the benefits of today’s auction next year.’
One can expect nonsense-speak from Unreliables, but here we have Ministers coming out with the same claptrap as they’ve always done, no matter when or what party is in power.
‘Roaring success’! Really? When in the last few weeks we have posted that companies already granted CfDs in the previous round have delayed construction because it makes them financially better off to do so, given the huge price increases which would otherwise have resulted in them having to pay money over.
And then we have the super-weasel-wheeze – some CfD-supported wind plant in fact paying the ESO to turn down (e.g. a positive bid price), in order to avoid their CfD repayment in periods where the day-ahead price exceeds their strike price.’
And in any event, the penalties for coming up with a ludicrously low price and then opting out of CfDs is much too low, making the whole CfD scenario an aspect of renewables absurdity.
So – roaring success? Yes, perhaps, but not for the consumer.
Most solar applications are in England, but….guess what? Most wind, onshore and offshore, is in Scotland.
The first link is to the Gov announcement; the second gives the list of those grants in the 4th round.”
https://www.gov.uk/government/news/biggest-renewables-auction-accelerates-move-away-from-fossil-fuels
Click to access contracts-for-difference-allocation-round-4-results.pdf
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Mark, many thanks for the links, quotes, satire and other commentary! I was a bit confused on which was which until googling suggested that Melani Onn should be *Melanie* Onn, “RenewableUK deputy chief executive,” as gov.uk has it, “Shadow Deputy Leader of the House of Commons” under Jeremy Corbyn as Wikipedia has it. And only 43 years old.
What an abominable racket, with this ‘old-timer’ of the Labour Party, a party that is meant to represent the poor and the workers, conniving in or perhaps even convinced by the dogma that she is doing good for the poor and the workers of the world while lining the pockets of the rich. Anyway, thanks again.
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“Price of offshore wind power falls to cheapest ever level in UK
Contract price is nearly 6% lower than previous auction in 2019, which could ease pressure on energy bills”
https://www.theguardian.com/environment/2022/jul/08/price-offshore-wind-power-falls-cheapest-ever-level-uk
“The price of offshore wind power in the UK has fallen to an all-time low, which could ease the pressure on future household energy bills.
Following the biggest ever UK renewables auction, the government said on Thursday the contract price for windfarms was nearly 6% lower than the previous auction, despite the rising cost of materials to build windfarms.
A string of new contracts should add about 7 gigawatts of clean power capacity to Britain’s turbine fleet by 2026. The government hopes to have 50GW by 2030 and has embarked on a push to expand Britain’s renewables industry in the face of rocketing fossil fuel prices….
…Offshore windfarm operators will sell power for as little as £37.35 per megawatt hour, 5.8% below the lowest bid in the most recent auction in 2019.
The “contracts for difference” guarantee wind-power companies fixed prices to sell electricity for the following 15 years. If the market price falls below the contract price, the government subsidises the difference. If the market is higher, the companies pay money back to the government.
Since wholesale energy prices began to rocket last year, windfarms have begun paying back money to the government….”
A few problems with this reportage, IMO. First of all, they started paying very small amounts back, but the last time I looked, those payments had dried up. Secondly, existing CfD contracts look more like options in favour of the wind farm companies, who have been deferring commencement dates, while they benefit instead from higher market prices. Kwasi Kwarteng’s plea for them to play the game seems to have fallen on deaf ears. And there’s this from Net Zero Watch:
https://www.netzerowatch.com/new-data-on-offshore-wind-costs/
“The announced costs for windfarms after 2024 do suggest a reduction in levelised costs, but only to around the £100/MWh mark. These reductions are due to the Dogger Bank windfarms, which are being built in shallow waters. However, they are also far offshore – up to 200km. The best guide we have as to the effect of such distances on costs is Hornsea 1, which, as we have seen, has turned out very expensive. So it would not be at all surprising if these huge windfarms turned out to be no cheaper at all.
Even if the Dogger Bank windfarms do turn out to be able to generate power at £100/MWh, electricity in the UK will still become disastrously expensive. ”
And note, especially:
“As always when using levelised costs, it should be noted that this refers only to costs at generator level. The cost of dealing with the intermittency of wind power is not included.”
That last quote is from the Net Zero Watch paper. The one that follows is from the Guardian report:
“Separately on Thursday, the National Grid laid out the biggest investment plan in the UK’s electricity network since the 1960s. In the £54bn upgrade connections to the grid for offshore windfarms will be coordinated for the first time.
National Grid’s electricity arm proposed 15 connection points to bring 18 offshore windfarms to land. Most offshore wind projects have their own connection to the grid. National Grid hopes to reduce costs and cut down disruption for coastal residents by reducing the number of cables and pylons needed.”
Funnily enough, nobody seems to be counting that extraordinary extra cost either when claiming that wind farms are cheap.
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“Major renewables boost as three isles wind farms given subsidy”
https://www.shetnews.co.uk/2022/07/07/major-renewables-boost-as-three-isles-wind-farms-given-subsidy/
“THREE Shetland based wind farm projects have been successful in applying for subsidy from the UK Government.
The Viking Energy, Beaw Field and Mossy Hill developments all feature in the government’s latest Contracts for Difference (CfD) auction results.
Viking is already under construction, but the news should in effect pave the way for Peel Energy’s already consented Beaw Field and Mossy Hill wind farms to go ahead.
Chairman of campaign group Sustainable Shetland Frank Hay said the announcement, with the “usual fanfare trumpeting cheap renewables”, will require close scrutiny.
“Cheapest is not always best and wind power comes with many drawbacks, notably the need for backup, which is not taken into account for CfD calculations,” he said. “If wind power is so cheap, why is there a need for subsidy at all? It should not be forgotten that subsidies are ultimately paid for by energy consumers through higher bills.”…”.
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“Government publishes Supply Chain Plan questionnaire”
https://www.cfdallocationround.uk/news/government-publishes-supply-chain-plan-questionnaire
The government has today published the Supply Chain Plan guidance and questionnaire for Allocation Round 5.
Key changes to Supply Chain Plans for AR5:
• Floating Offshore Wind projects smaller than 300MW will be included in the Supply Chain Plan (SCP) process
• Raising the SCP pass mark from 50% to 60% (except for Floating Offshore Wind projects smaller than 300MW for whom the pass mark will be 50%)
• Introduction of feedback sessions into the Supply Chain Plan process to give applicants the opportunity to make amendments to a plan during the assessment process.
• Introduction of a new template for the supply chain plan questionnaire to provide more clarity
In order to qualify for a Contract for Difference (CfD) Allocation Round, CfD applicants for a generating station with generation capacity of 300MW or more – and from Allocation Round 5, CfD applicants for Floating Offshore Wind projects of any size – will be required to provide National Grid ESO (as Delivery Body) with a statement by the Secretary of State for Business, Energy and Industrial Strategy approving the Supply Chain Plan submitted in respect of that station.
The applicant’s responses to the scored sections of the Supply Chain Plan questionnaire will be assessed to determine award of this Supply Chain Plan statement of approval, and hence eligibility to participate in the CfD scheme.
These documents set out the process for submitting and assessing supply chain plans for Allocation Round 5:
• the Supply Chain Plan questionnaire for projects over 300MW
• the Supply Chain Plan questionnaire for Floating Offshore Wind projects under 300MW
• guidance on how to complete the questionnaire and on the Supply Chain Plan process as a whole
• a copy of the relevant tables to complete as part of the Supply Chain Plan questionnaire
Successful applicants also need to receive a Supply Chain Implementation Statement from the Secretary of State confirming they have successfully passed their Supply Chain Plan implementation assessment in order to fulfil one of their CfD Operational Condition Precedents (OCP).
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BEIS has just issued this:
“Contracts for Difference, Supply Chain Plan for Allocation Round 5
Your Questions and Answers, September 2022”
There’s quite a lot more. If anyone is interested in finding out more, I can supply it. However, given the nature and scale of the energy crisis, it still feels as though BEIS is fiddling while Rome burns.
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In a fast-moving arena, it’s tempting to think that the latest update about CfD AR5 will soon be out of date, but who knows?
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“Considerations for future Contracts for Difference (CfD) rounds”
https://www.gov.uk/government/consultations/considerations-for-future-contracts-for-difference-cfd-rounds
Given the massive problems with CfDs, evidenced by the failure of many energy companies to take up their options under them, preferring to rake in windfall profits under current market rates instead, this all looks rather weak to me.
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Meanwhile, maybe worth a read:
“Methodology used to set Administrative Strike Prices for CfD Allocation Round 5 ”
Click to access cfd-ar5-asp.pdf
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A translation into English of that Government consultation:
“BEIS cracks down on CfD start date delays ahead of auction
UK government consults on plan to stop developers cashing in on high merchant power prices once projects are built”
https://renews.biz/82627/beis-cracks-down-on-cfd-start-date-delays-ahead-of-auction/
Good news that somebody is actually thinking about how to put an end to this nonsense. The only problem is that if they do achieve their plan, the Law of Unintended Consequences will kick in, and they’ll probably find that new CfDs at low prices dry up altogether. That’s not ideal, but it might put an end to the nonsense of people claiming that wind energy is “nine times cheaper” than gas. Reality might just dawn at that point. ANd if it does, with luck, the drive to ever more renewables might cease.
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Confirmation of “Allocation Round 5 Launch Event”:
https://www.cfdallocationround.uk/news/allocation-round-5-launch-event
Those differences are referred to here:
https://www.cfdallocationround.uk/news/ar5-publications-and-future-cfd-consultation
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The latest timescale is now in:
“Contracts for Difference Allocation Round 5: Indicative timetable scenarios”
https://www.cfdallocationround.uk/contracts-difference-allocation-round-5-indicative-timetable-scenarios-0
Provisional timetable details are here:
Click to access AR5%20indicative%20timetable%20-%20all%20scenarios%20-%20.pdf
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“Allocation Round 5 Budget Confirmed
The government has today confirmed that a budget of £205 million has been set for the fifth
allocation round of the Contracts for Difference (CfD) scheme.
Details of the budget are set out in the Budget Notice, alongside several other statutory notices
required to launch the fifth allocation round (AR5), has been published by the government on 16th
March 2023.”
That’s another £205M of taxpayers’ money casually thrown away. This is the interesting bit:
“Contracts for Difference (CfD): Budget Notice for the fifth
Allocation Round, 2023
From: Secretary of State for Energy Security and Net Zero
To: National Grid Electricity System Operator Limited, EMR Delivery Body”
Click to access AR5%20Budget%20Notice%20PDF.pdf
Strike prices, in 2012 prices, note, are as follows:
Table 3: CfD Administrative Strike Prices (£/MWh, in 2012 prices)
Technology Type Administrative Strike Price
Advanced Conversion Technologies (ACT) 182
Anaerobic Digestion (> 5MW) 136
Dedicated Biomass with CHP 162
Energy from Waste with CHP 116
Floating Offshore Wind 116
Geothermal 119
Hydro (>5MW and 5MW) 53
Remote Island Wind (> 5MW) 53
Sewage Gas 148
Solar PV (> 5MW) 47
Tidal Stream 202
Wave 245
The only cheap ones are landfill gas, wind, and large-scale solar and (to an extent) hydro. The rest are very expensive. My money is on people signing up for expensive contracts, and the “cheap” (though they are not so cheap as they look, since they are in 2012 prices) one not ultimately going ahead. After all, wind companies are screaming out that they need financial help now if they are to proceed. This looks like another exercise in Cloud Cuckoo Land.
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“Allocation Round 5 Opens”
https://www.cfdallocationround.uk/news/allocation-round-5-opens
I’m awaiting confirmation that the loophole allowing applicants to defer start dates (apparently indefinitely) while hoovering up higher market prices has definitively been closed.
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“The great renewables rip-off continues”
https://www.netzerowatch.com/the-great-renewables-rip-off-continues/
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“Contracts for Difference Subsidies On The Rise Again”
https://notalotofpeopleknowthat.wordpress.com/2023/04/14/contracts-for-difference-subsidies-on-the-rise-again/
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“Call for Evidence on Non-Price Factors in the Contracts for Difference (CfD) Scheme”
https://www.cfdallocationround.uk/news/call-evidence-non-price-factors-contracts-difference-cfd-scheme
I’ll be interested to see how this pans out. I thought the Government was supposed to be looking at tightening what appears to be an incredibly lax scheme that effectively grants one-way options in favour of renewables companies, enabling them to enjoy the best – and the consumer to suffer the worst – of both worlds. Yet the wording of this consultation (“[i]n recognition of the deployment challenges currently faced by the renewable energy industry”) seems to me to suggest yet more favours might be coming the way of the renewables industry. Watch this space.
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Am I too sceptical? The Guardian sees things differently:
“UK ministers review bidding process for funding new renewable energy projects
Government wants to create more green jobs in response to Joe Biden’s Inflation Reduction Act package”
https://www.theguardian.com/business/2023/apr/17/uk-bidding-renewable-energy-green-jobs-joe-biden
But then the Guardian also says this (which I venture to suggest isn’t entirely true):
And Ed Miliband is quoted as saying this:
Dream on.
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Mark:
“UK ministers review bidding process for funding new renewable energy projects
Government wants to create more green jobs in response to Joe Biden’s Inflation Reduction Act package”
But as one of our more vocal anti-establishment economists keeps reminding us – “Jobs are a cost”.
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The AR5 application window closes today. Applications are to be assessed between 25th April and 24th May. Watch this space.
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An interesting observation by Paul Homewood:
“CfD Indexation To Cost Energy Users £360 Million This Year”
https://notalotofpeopleknowthat.wordpress.com/2023/05/01/cfd-indexation-to-cost-energy-users-360-million-this-year/
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More from Paul Homewood about CfD indexation:
“CfD Indexation Is A Rip Off”
https://notalotofpeopleknowthat.wordpress.com/2023/05/02/cfd-indexation-is-a-rip-off/#more-63973
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Behind a paywall, unfortunately, but I have seen how it starts:
“Orsted postpones cheap energy contract”
https://www.thetimes.co.uk/article/orsted-delays-cheap-energy-contract-hsztcrg28?
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Quick, someone tell the Secretary of State – whoever it is this week – to phone Orsted and ask them nicely to take up their “contract”. I’m sure that will work.
And £84/MWh is not cheap by the standards of the past decade, only the past year.
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From the latest CfD Stakeholder Bulletin:
The following link leads to a download for those interested in arcana:
https://www.lowcarboncontracts.uk/publications/cfd-co-location-generator-guidance
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CfD AR5 update:
It would be interesting to know more about the appeals received by Ofgem. Unfortunately the update doesn’t provide that information.
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From today’s bulletin:
Surely that’s an acknowledgement that, far from CfDs being good for consumers, under CfDs consumers subsidise the renewables companies? We have to subsidise them, but we can’t subsidise them when providing electricity supplied to offshore [oil & gas] platforms. That wouldn’t be “green”, I suppose…..
Supply Chain Plan Guidance is also now available:
Click to access cfd-ar6-scp-guidance.pdf
It sounds good, in principle:
However, (and I may be wrong) I can’t see anything in it that will ensure the creation or maintenance of “green” jobs in the UK. It looks like a load of box-ticking bureaucracy to me.
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The gravy train just keeps growing. Here’s the latest announcement regarding the CfD AR5:
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“UK windfarm red tape to cost billpayers £1.5bn a year, say analysts
Analysis finds Treasury rules on new windfarms likely to stifle energy generation and keep bills high”
https://www.theguardian.com/environment/2023/aug/17/uk-new-offshore-windfarms-treasury-rules-bills-analysis
The analysis seems completely deluded. The evidence is that renewables are requiring greater subsidies and that renewable energy companies are increasingly shouting that they need more help. Some are starting to show substantial losses and are experiencing financial and other difficulties generally. As for the ECIU, it might describe itself like this:
The reality, IMO anyway, is that it is an organisation that lobbies for more renewable energy. Given that he who pays the piper calls the tune, its sources of funding are very significant, I would suggest:
I would regard every one of those as climate alarmist organisations.
Robin Guenier might like to note that his MP, Bim Ofalami, is a member of its advisory board. His short biography at the ECIU is as follows:
Given that he is a net zero champion, I suspect that Robin has his work cut out in trying to persuade him to take a sensible view of UK energy policy.
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“Europe’s Biggest Offshore Wind Market is Heading For Disaster
Rising costs may mean no developers bid in this year’s auction
Offshore wind is centerpiece of UK’s net zero targets”
https://www.bloomberg.com/news/articles/2023-08-17/uk-green-agenda-faces-another-hurdle-as-offshore-wind-stumbles
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“The real costs of wind power prove the sums don’t add up
The chasm between net zero ambition and reality is growing ever larger”
https://www.telegraph.co.uk/business/2023/08/30/renewable-energy-net-zero-britain-wind-power-costs/
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“Offshore wind expecting to lose out in auction for UK financial help
Energy industry experts say steep rise in costs could result in few projects submitting bids”
https://www.theguardian.com/business/2023/sep/07/offshore-wind-expecting-to-lose-out-in-auction-for-uk-financial-help
Excuse me? “Crucial government support”? “Surging costs”? I thought this stuff was cheap, and that the Guardian is always telling us we need more of it to bring bills down. It’s not true, of course.
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More on the imminent failure of the CfD AR5:
“UK offshore wind auction set to flop”
https://www.bbc.co.uk/news/business-66740920
Paul Homewood is also reporting on a similar version of the story in the Times:
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And now the failure of CfD AR5 is official:
“UK renewable auction flops with no new contracts for offshore wind projects – business live”
https://www.theguardian.com/business/live/2023/sep/08/uk-renewable-auction-contracts-offshore-wind-energy-stock-market-business-live
Of course, it’s all the government’s fault (they certainly bear a large degree of responsibility for taking the UK down this road), and the usual suspects are wailing and gnashing teeth. The Guardian can’t resist repeating (even if only a quote) the old lie (albeit slightly modified now) that “for a time, offshore wind farms were 9 times cheaper than new gas plants.”. It wasn’t true then, and it isn’t true now:
The quote comes from Sam Richards, founder and campaign director of Britain Remade. Well, as for them:
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Here’s the Government spin:
“Record number of renewables projects awarded government funding
Flagship renewables scheme set to deliver 3.7GW of clean homegrown energy, enough to power the equivalent of 2 million homes.”
https://www.gov.uk/government/news/record-number-of-renewables-projects-awarded-government-funding
Here’s NetZero Watch’s rather more realistic appraisal:
“Dismal UK CFD auction result”
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So much for renewables being cheap:
“First floating wind farm in Wales delayed over funding”
https://www.bbc.co.uk/news/uk-wales-66748924
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Mark, that Welsh floating wind project was named after HMS Erebus, a ship with a famously disastrous ending and whose name has always meant ‘gloom’, plus the project is run by a company with ‘Blue’ in its current and former names. One might almost wonder whether the project was ever meant to succeed or whether it was just something proposed by execs at its ultimate owners – TotalEnergies, the dastardly oil magnates formerly known as Total – when they were a bit bored and blue in early 2020.
I wouldn’t bet on the floating wind farm ever being completed but it’ll probably get UK govt grants for a few more years yet.
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“Does the UK government still have an offshore wind strategy?
Nils Pratley”
After the failed auction, ministers must accept that the workhorse of their renewables plan isn’t as cheap as it once was”
https://www.theguardian.com/business/nils-pratley-on-finance/2023/sep/08/does-the-uk-government-still-have-an-offshore-wind-strategy
Obviously I disagree with the claim that offshore wind is likely to be cheaper than gas when the hidden costs of coping with wind’s intermittency are taken into account. That aside though, it’s a pretty good article, inasmuch as it demonstrates that the Government is seriously adrift with regard to UK energy policy.
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This Guardian “explainer” piece is away with the fairies:
“What went wrong at UK government’s offshore wind auction?
Industry sources say auction was ‘catastrophic’, after failure to secure any new offshore windfarms”
https://www.theguardian.com/environment/2023/sep/08/what-went-wrong-at-uk-governments-offshore-wind-auction
What’s of interest to me is the claim that:
Even if true (which I doubt) £24 per household is a drop in the ocean compared to the costs every household pays to subsidise renewable energy. Although those costs aren’t mentioned, everyone associated with UK energy policy) (and, I suspect, the Guardian’s editors) is well aware of those costs, so in effect that paragraph is an admission that the net effect of UK energy policy and its tilt to renewables and net zero is costing us all a lot of money.
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Mark,
The claim that the failure to secure more offshore wind contracts will drive up bills for consumers is pure propaganda, but it’s being repeated across the board by Renewables cronies, notably Greenpeace and Ed Milliband, the shadow Energy Secretary. ‘Catastrophic’ will have REAL meaning when this dangerous eco-zealot, responsible in no small measure for the Climate Change Act 2008, finally gets back into power at the next election. We thought the fake Conservatives were bad.
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“Wind industry on hold after auction flop spooks developers
Bosses warn that lack of state support risks undermining Britain’s overall net zero goals”
https://www.telegraph.co.uk/business/2023/09/17/wind-industry-on-hold-after-auction-flop-spooks-developers/
Lack of state support, eh? I thought the line was that we need more renewables to save us money, not cost us.
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“UK prepares to hike wind farm prices as developers struggle”
https://www.energyvoice.com/renewables-energy-transition/wind/uk-wind/541063/uk-prepares-to-hike-wind-farm-prices-as-developers-struggle/
So, not cheap after all. What will it take to stop this?
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A press release from Net Zero Watch today:
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The Guardian has the story too. When it’s trailed this widely, it looks as though it’s likely to come about:
“UK subsidies for offshore windfarms likely to increase amid rising costs
Developers say higher prices across their supply chains mean costs have climbed by about 40%”
https://www.theguardian.com/business/2023/nov/10/uk-subsidies-for-offshore-windfarms-likely-to-increase-amid-rising-costs
So much for “cheap” renewables.
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An utterly delusional self-congratulatory press release, when they should be hanging their heads in shame:
“Boost for offshore wind as government raises maximum prices in renewable energy auction
Maximum price that other renewables projects can receive in the next Contracts for Difference (CfD) auction has also been raised.”
https://www.gov.uk/government/news/boost-for-offshore-wind-as-government-raises-maximum-prices-in-renewable-energy-auction
Of course, to the average reader, this represents disinformation, since the figures quoted are all at 2012 prices. Offshore wind, after inflation, in 2023/4 prices will be circa £100 per Mwh (with index-linking built in going forward).
Further details on the prices on offer (NB at 2012 prices – the effect of inflation must be added on) can be found here:
“Contracts for Difference (CfD): Core Parameters for the sixth allocation round, 2024”
Click to access ar6-core-parameters-notification.pdf
The real detail regarding AR6 can be found here:
Click to access draft-ar6-allocation-framework.pdf
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Why put all our eggs in the renewables basket when wind speeds seem to be in decline?
“‘Unfavourable’ weather hits wind power production at SSE
The energy company said a rise in offshore wind generation has not been enough to offset a big fall from onshore wind farms.”
https://www.expressandstar.com/news/uk-news/2023/11/15/unfavourable-weather-hits-wind-power-production-at-sse/
Still, with a Uniparty both in charge, and in waiting in the form of the opposition parties, they have nothing to worry about:
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And in the Netherlands …
https://brusselssignal.eu/2023/11/dutch-energy-prices-double-amid-green-transition/
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Paul Homewood on the latest developments:
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“World’s largest offshore wind farm to be built in UK waters
Boost for Government’s net zero plans as Ørsted agrees to press ahead with £8bn project”
https://www.telegraph.co.uk/business/2023/12/20/worlds-largest-offshore-wind-farm-gets-go-ahead-off-uk-coas/
Translation: “offshore wind power is not 9 x cheaper than gas – far from it. In fact it’s very expensive. So expensive that when the Government finally tightened up the toothless CfD regime, it received no bids for offshore wind farms last time round. Panic ensued, and now Orsted has obtained promises of lots of subsidies from the useless, spineless UK government”.
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“Government publishes Allocation Round 7 consultation”
That’s from the Government email. The link online can be found here:
https://www.gov.uk/government/consultations/proposed-amendments-to-contracts-for-difference-for-allocation-round-7-and-future-rounds
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“Government Subsidies for Wind Power Hit Record Levels”
https://dailysceptic.org/2024/01/13/government-subsidies-for-wind-power-hit-record-levels/
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AR6 budget: Government gives major backing to renewables sector
https://www.cfdallocationround.uk/news/ar6-budget-government-gives-major-backing-renewables-sector
“The Government has confirmed a budget of over £1 billion for Allocation Round 6 (AR6) of the Contracts for Difference (CfD) scheme.
The budget was announced as part of the Chancellor’s Spring Budget this afternoon.
It is the largest budget to be set for a CfD allocation round and will help to ensure that the scheme continues to support delivery of the UK’s ambitious decarbonisation commitments….
…The Budget Notice sets out that the overall budget will be £1,025m – with £120m allocated to established technologies, such as solar and onshore wind (Pot 1); £105m allocated to emerging technologies, such as floating offshore wind and geothermal (Pot 2); and £800m allocated to offshore wind (Pot 3).
The Pot 1 budget of £120m includes monetary maxima for onshore wind, solar and remote island wind of £120m each. The Pot 2 budget of £105m includes an £8m monetary maximum for geothermal and ringfenced support (a monetary minimum) of £10m for tidal stream projects. The Pot 3 budget of £800m includes monetary maxima for ‘permitted reduction’ and new offshore wind projects of £800m each….
…Budgets are presented in 2011/2012 prices in line with convention of the scheme and to enable comparison across rounds. These figures are an estimate of annual support in the most expensive year in the first four years, across all three auction pots, following deployment. Actual annual figures will vary over the lifetime of the contract depending on future wholesale electricity prices and outcomes of the competitive auction process….”
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“Government publishes response to AR6 contract changes consultation”
The Government has today published the response to the Allocation Round 6 (AR6) contract
changes consultation alongside the final contract documents for the round.
The response confirms changes to make generators that directly supply offshore oil and gas
facilities ineligible for the Private Network CfD Agreement from AR6 onwards, implementing
the government’s previous decision on this matter.
It also confirms that the definition of Milestone Delivery Date (MDD) has been amended to
allow the MDD to be extended where a generator has not received confirmation from the
Ministry of Defence of the availability of suitable mitigation measures in relation to interference
between windfarms and air defence radar systems.
Other confirmed contract changes concern strengthening ‘Know Your Customer’ checks and
introducing a new threshold for the Change Control Procedure.
“
AR7: Government publishes response to Sustainable Industry Reward consultation”
The Government has today published its response to the consultation on introducing a CfD
Sustainable Industry Reward (SIR).
The response confirms that the CfD SIR process will run for three years from Allocation Round
7 (2025) onwards as a competitive allocation for extra revenue support. The SIR process will
take place six months before the main CfD auction, and applicants will need to meet minimum
standards to gain access.
Some key aspects of the proposed SIRs have been amended to simplify the process. The
number of criteria has been reduced to two, and there are now only three questions. The
criteria for SIRs will be:
a) Investment in shortening supply chains in deprived areas in the UK; or
b) Investment in more sustainable means of production anywhere in the world; or
c) A combination of both approaches by investing in shorter supply chains in UK deprived
areas and ensuring that such investment goes to more sustainable means of
production.
I’m not sure there is anything new here, but I include it for the sake of ongoing completeness.
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“Why this week’s wind power auction could be a make-or-break moment in the UK’s net zero journey”
https://www.cityam.com/why-this-week-could-be-a-make-or-break-moment-in-the-uks-net-zero-journey/
“…Despite being the second-largest offshore wind market in the world currently, the UK sector is facing something of a confidence crisis, built by the bruising taken in the last two auction rounds.
The energy sector’s number one criticism going into both of these rounds and in their post-mortems was that there wasn’t enough funding to create an attractive development incentive for companies to invest in and prove the net zero target to remain viable.
And now, even though the investment has been upped to £800m, there are still huge concerns that this will not be sufficient to bring the five would-be developers; SSE Renewables, Vattenfall, Orsted, ScottishPower Renewables and RWE, and their combined 12.2GW of capacity to market.
Gavin Watson, an energy partner at law firm Pillsbury, Winthrop, Shaw and Pittman, said AR6 is a “watershed moment” for the industry.
“Whilst AR6 has all the makings of an auction round fit for success, this is not the end of the story,” he told City A.M.
“Continued supply chain bottlenecks, expected spikes in steel demand and inflationary pressures are threatening to create significant headwinds for successful bids.
“Constrained cable supply is perhaps the most pressing supply chain challenge facing the industry in the short-term and with limited manufacturing capacity in a world rushing to electrify, these cables are likely to remain in short supply for many years to come.”
Adam Berman, deputy director of Energy UK, added: “2030 is fundamentally not far away when it comes to lead times on offshore wind and net zero.
“It is critical the government approaches AR6 with high ambition and should there be significant projects bidding in so the government should be prepared to increase the budget according to how many projects are available.”…”
In other words – give us money, and lots of it, or else. So much for this stuff being cheap and enhancing our energy security.
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“Net Zero Watch brands new windfarm subsidy ‘obscene’”
Green Volt project could be handed annual half billion pound subsidy
Net Zero Watch has revealed the astonishing scale of subsidies likely to be received by a windfarm planned for Scottish waters. The Green Volt floating offshore windfarm could hand its backers around £500 million pounds per year in subsidies. The project received official approval from Marine Scotland last week.
Because it is a floating windfarm, it is eligible for a much higher level of subsidies than fixed-bottom or onshore windfarms. At the launch of the most recent subsidy auction, the Government announced that it had raised the maximum price for floating windfarms to around £240 per megawatt hour [1], around four times current market prices. If the whole windfarm is subsidised at this level, consumers will probably have to pay more than £500 million per year in subsidy [2].
Net Zero Watch director Andrew Montford said:
Notes for editors
[1] In 2024 prices. Contracts for Difference are awarded in 2012 prices and then uplifted for inflation. The price announced for offshore capacity was £176/MWh, equivalent to £243 in current pries.
[2] Subsidy at this level would require Greenvolt to be successful in several consecutive CfD auctions.
[3] Based on the capacity factor achieved by the extant Hywind floating windfarm
[4] Approximate average since start of February.
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The latest update has been issued regarding AR6:
AR6: General Election and round update
On 22 May 2024, the Prime Minister announced that a General Election will be held on 4July 2024.The election period will coincide with AR6, which is currently in progress and is expected to conclude at some point during the summer depending on the timeline scenario to which the round runs.
AR6 is currently running to timeline scenario 3 after one or more non-qualifying applicants requested National Grid (NG) ESO to review its qualification decision. NG ESO will review the relevant applications by 11 June 2024.
NG ESO informed applicants whether they had qualified to participate in the round on 20May 2024. Between 21-28 May 2024, any non-qualifying applicants were able to request that NG ESO reviewed its decision. As stated above, one or more such requests has been received, and therefore, the round is currently proceeding according to timeline scenario 3…
...During the election period, essential business, including routine business necessary to
ensure the continued smooth functioning of government and public services, must be
allowed to continue. This can include a CfD allocation round that is already open, although
significant decisions and announcements about the round may be subject to the latest
Cabinet Office advice on the election period…
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“The cost of Contracts for Difference”
https://www.netzerowatch.com/all-news/the-cost-of-contracts-for-difference
And Paul Homewood’s additional observations:
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Well, who’d have thought it? (sarc)
“Labour must speed up wind power expansion or miss targets, says renewables industry
Green energy executives say plans for new power projects need to be more ambitious to achieve net zero grid by 2030″
https://www.theguardian.com/environment/article/2024/jul/29/labour-must-speed-up-wind-power-expansion-or-miss-targets-says-renewables-industry
Labour’s clean energy targets may already be in jeopardy just weeks after the party came to power with the promise to quadruple Britain’s offshore wind power, according to senior industry executives.
The offshore wind industry has said there will not be enough time to develop the projects needed to create a net zero electricity system by the end of the decade unless ministers increase the ambition and funding of the government’s upcoming “make or break” subsidy auctions….
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News flash – “Green energy executives” rub hands together with joy as Labour commits to “net zero grid by 2030″ – A spoke person said (who wished to remain anonymous) this is a great day for UK, we will spends the Billions wisely to save the Planet (SARC)
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“Government sets record budget for green energy auction”
https://www.bbc.co.uk/news/articles/cmm2qdgn910o
The government is set to significantly raise the budget for this year’s renewable energy auction, following calls from industry for more support.
Energy Secretary Ed Miliband will announce on Wednesday that the budget will be increased to £1.5bn, up by £500m from last year.
The majority of the funding will be available to develop offshore wind power, which the Labour government says it wants to quadruple by 2030.
The extra money has been broadly welcomed by the renewables industry, but there are warnings that without other changes, any new projects may not be delivered in time...
...Last year, developers did not bid for any offshore wind contracts – they argued that the price being offered was too low to make the projects viable….
...Mr Miliband has said Labour’s commitment to maintain this higher price and increase the budget available for projects would “restore the UK as a global leader for green technologies”.
But Claire Coutinho, shadow Energy Secretary, said the government’s plans were untested and uncosted.
“Labour are ramping up renewables, at the same time as decimating investment in gas which is our only existing back up for when the sun doesn’t shine and the wind doesn’t blow. What will be put in its place? Ed Miliband can’t tell you,” she said….
...Dr Rahmat Poudineh from the Oxford Institute for Energy Studies agreed that the higher budget would bring in more bids but warned that developers still faced challenges, including unexpected cost increases and delays in connecting their projects to the grid....
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“Labour tries to attract clean energy contracts with record £1.5bn for auction
The new budget comes after the previous government failed to award a single new offshore wind contract in 2023″
https://www.theguardian.com/environment/article/2024/jul/31/labour-tries-to-attract-clean-energy-contracts-with-record-15bn-for-auction
I loved this bit:
…But the way the contracts are set up means they are not expected to raise costs for consumers….
But they will. And we’re all paying more through our taxes. If renewables really were cheaper than fossil fuels, none of these subsidies would be necessary.
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Eyes peeled on 3rd September, then:
“AR6 update: Results to be published on 3 September”
The results of the sixth allocation round (AR6) of the Contracts for Difference scheme will be
published on Tuesday 3 September 2024 in accordance with the published timeline.
The results will be published on GOV.UK immediately after National Grid ESO has notified
applicants.
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Shameful reporting from the BBC, which provides a puff piece article for the outcome of AR6, without mentioning the strike price (58% higher for offshore wind than the failed AR5, which failed to bring forth any bids:
“Nine offshore wind farm projects awarded in UK auction”
https://www.bbc.co.uk/news/articles/c86ldzve4neo
Even more shameful is this (ignorance, or wilful misinformation?):
…On Tuesday, a total of 131 contracts have been awarded to firms for projects which will generate 9.6 gigawatts (GWs) of renewable energy….[my emphasis].
Not so. Even the Government’s own stakeholder bulletin says that 131 projects were successful at a combined total capacity of 9.6GW.
There’s a big difference between capacity and actual generation. Does the BBC reporter really not understand the difference, or don’t they care?
Meanwhile, if you want the real lowdown (as opposed to the spin), get it from Paul Homewood and Net Zero Watch:
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Or if you prefer the nauseatingly self-congratulatory and utterly deluded Government press release, it’s here:
https://www.gov.uk/government/news/government-secures-record-pipeline-of-clean-cheap-energy-projects
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To put all this another way, here’s a quotation from the Net Zero Watch press release:
‘If Miliband’s Net Zero plans could once be regarded as unfeasible, they must surely now be seen as ruinous.’
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A particular low point is the process whereby successful bidders in AR4 have been allowed to “re-bid” up to 25% of their projects’ capacities into this higher-priced auction. This looks like blatant confirmation that those earlier prices were low-balled with the intention/expectation of some form of re-negotiation post award.
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“Ed Miliband adds £150 to household bills with wind turbine building spree”, according to the Telegraph. It also points out that the profits for the responsible companies are being exported.
It is with a slightly manic glazed expression that we are told renewables are the cheapest form of electricity these days. It reminds me of that old anti-drug abuse advert, where the heroin addict claims to be suffering from a touch of flu or something.
I excerpt here Emma Pinchbeck’s soundbite:
It’s disappointing to see Claire Coutinho adding her approval too. All the soundbites are relentlessly pro, except for John Constable’s, which adds a little sense to the mix of deluded platitudes.
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There is also Neil Record in the Telegraph describing the scheme as “economic suicide.”
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Paul Homewood has the Neil Record piece in full, for those who can’t get past the Telegraph paywall.
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Oops, here’s the link:
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“Record August CfD Subsidies
Windy August has driven record Contract for Difference subsidies and the signs are subsidies will rise further in the winter months.”
https://davidturver.substack.com/p/record-august-cfd-subsidies
…The headline is that overall CfD subsidies rose sharply in August 2024 to a total of £237m, the third highest total on record and by far the highest level for the month of August…
…The total is up £84.2m from July’s total. The main driver of the increase is offshore wind which is up £74.5m from a month ago. This August’s total is also up £123.8m from August 2023. Since August last year, offshore wind subsidies are up £72.3m, biomass conversion £35m, biomass with CHP up £10.2m, onshore wind £5.1m.
There are several factors driving the increase in subsidy since last year. First and most obvious is that more wind farms have now activated their CfDs since last year. Moray East and Hornsea Project 2 offshore projects came online earlier this year as did the Sneddon onshore wind farm. Moreover, the CfD part of Drax biomass plant was not used at all last August but attracted £25.6m in subsidy in August 2024.
However, the number of turbines claiming subsidy is not the only driver of increased subsidy. Load factors are also up. This means that both onshore and offshore wind farms produced closer to their theoretical maximum during the month…
...The other things that drive the levels of subsidy are the CfD strike prices and the reference price used to calculate the subsidy level. For offshore wind, the weighted average strike price has fallen ~£23/MWh from about £178/MWh in August 2023 to £155/MWh this year. This is because of the aforementioned addition of Moray East and Hornsea Project 2 which both have lower strike prices than the earlier offshore wind farms. The strike prices for onshore wind are up a few pounds from last year to £113/MWh and solar is up £4 to £110/MWh.
However, the Intermittent Market Reference Price (IMRP) which is used as the baseline for the price that renewable electricity was sold for in the market is down significantly on last year. The average IMRP, weighted by generation, has fallen about £25/MWh from £76/MWh in August 2023 to about £51/MWh in August 2024.
The subsidy per MWh is calculated as the difference between the strike price and the IMRP. The upshot is that the subsidy per MWh for offshore wind is up a bit since last year and is up sharply for onshore wind and for solar power…
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The Government’s response to the consultation process regarding AR7 can be found here:
https://www.gov.uk/government/consultations/proposed-amendments-to-contracts-for-difference-for-allocation-round-7-and-future-rounds
I don’t think there are any surprises regarding the response, but what I found telling was the identity of those who responded. Truly this is an area where vested interests are very much to the fore:
We received 72 responses to the consultation from a wide [sic] range of stakeholders, including:
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The UK’s contracts for difference regime may be proving to be an expensive disaster, but it seems that German politicians are capable of hurting their energy users too. In their case it’s a similar scheme, for solar power:
“The Country Where Taxpayers Are Charged Billions When the Sun Shines”
https://dailysceptic.org/2024/10/26/the-country-where-taxpayers-are-charged-billions-when-the-sun-shines/
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It just keeps getting worse:
“Government Launches the Clean Industry Bonus”
https://www.cfdallocationround.uk/news/government-launches-clean-industry-bonus
The government has launched the Contracts for Difference (CfD) Clean Industry Bonus (CIB). Fixed and floating offshore wind applicants can obtain extra CfD revenue support if they choose to invest in more sustainable supply chains.
The CIB allocation framework has been published on gov.uk. The CIB allocation framework sets out how to apply for a Clean Industry Bonus, and how funding will be allocated. The CIB guidance sets out the process for receiving CIB payments, and other matters related to the delivery of CIB commitments.
A consultation on CfD contract changes required to include the CIB in the contract has been published on gov.uk. The consultation closes on 10 December 2024.
The CIB application window is currently scheduled to open in February 2025. In due course, government will publish more documents to help with the application process.
The statutory notices launching the round can be found on gov.uk.
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“Contracts for Difference (CfD) Allocation Round 7: Supply Chain Plan questionnaire and guidance
Details of the Supply Chain Plan application process for the Contracts for Difference (CfD) allocation round 7.”
https://www.gov.uk/government/publications/contracts-for-difference-cfd-allocation-round-7-supply-chain-plan-questionnaire-and-guidance
In order to qualify for a Contract for Difference (CfD) Allocation Round, CfD Applicants for onshore wind or solar generating stations of 300 megawatts (MW) or more will be required to submit a Supply Chain Plan to the Department for Energy Security and Net Zero. Successful applicants will be awarded a Statement of Approval from the Secretary of State, which can be submitted by the Applicant to the National Grid ESO (as Delivery Body) when they are applying to participate in the CfD allocation round.
The aim of the Supply Chain Plan process is to encourage competitive, productive and sustainable supply chains for low carbon electricity generation projects…..
I think it’s dawning on them that far from reducing costs the ongoing ARs under the CfD regime are adding to costs. Dig further into the detail, and we find this:
https://assets.publishing.service.gov.uk/media/674eeda0d7e2693e0e47cfc9/cfd-scp-guidance-for-ar7.pdf
The Government’s second mission of five is clean power by 2030. The Government is
working with the private sector to radically increase deployment of renewables,
including onshore wind and solar. For example, the government has established an
Onshore Wind Industry Taskforce and re-established a Solar Taskforce that each bring
together key players in their respective sectors to identify the barriers to deployment
and commit to action. This way we can ensure that onshore wind and solar are
deployed in a way that is best for the British business, bill payers, and local
communities.
The delivery of effective, open and competitive supply chains will assist in bearing down
on the costs of low carbon electricity generation in the UK, encouraging investment in
low carbon electricity generation to meet our net zero targets by 2050.
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A technical update, the government’s response to the Clean Industry Bonus consultation.:
https://www.cfdallocationround.uk/news/response-to-the-clean-industry-bonus-consultation
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Away from the dry as dust language relating to AR7 amendments, we find this government press release:
“New industry bonus opens to support good jobs and low carbon manufacturing factories
Industrial heartlands and coastal areas will receive a major economic boost as the government backs renewable energy firms investing in industrial communities.”
https://www.gov.uk/government/news/new-industry-bonus-opens-to-support-good-jobs-and-low-carbon-manufacturing-factories
You have to persevere though loads of self-congratulatory verbiage before arriving at the meat of it:
…The bonus will come with an initial £27 million per gigawatt of offshore wind projects. That means if developers commit to 7-8 GW of offshore wind, up to £200 million of funding could be made available.
Funding will be allocated competitively with the results announced by the Energy Secretary in the summer.…
…The funding will come through the government’s Contract for Difference mechanism. The scheme is designed to protect billpayers from high costs with the lowest price bids successful, ensuring value for money. [sic].
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Mark – have given up trying to understand how the CoD works. But from your comment –
“The scheme is designed to protect billpayers from high costs with the lowest price bids successful, ensuring value for money“
So if the bidders all go high?
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The latest with regard to CfDs is a DESNZ Clean Industry Bonus questionnaire:
https://forms.office.com/pages/responsepage.aspx
The Clean Industry Bonus (CIB) offers extra revenue support to fixed and floating offshore wind applicants to the Contracts for Difference scheme who choose to invest in more sustainable supply chains.
Almost incredibly, some people still seek to argue that renewable energy isn’t being subsidised on an ongoing basis, and that the CfD regime doesn’t subsidise renewables.
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“Further reforms to the Contracts for Difference scheme for Allocation Round 7”
https://www.gov.uk/government/consultations/further-reforms-to-the-contracts-for-difference-scheme-for-allocation-round-7
Much more detail here:
https://assets.publishing.service.gov.uk/media/67b84bee4ad141d908353395/cfd-allocation-round-7-reforms-consultation.pdf
They seem keen to push floating offshore wind farms, despite the cost:
To provide greater certainty of the Government’s ambition to lead the world in the development
of floating offshore wind to the developers of Test & Demonstration scale projects, we intend to
support multiple Test & Demonstration scale projects in AR7. We will look to set the budget
and other round parameters to facilitate this, to help support the sustainable development of
this nascent sector in deployment zones across the UK, with consideration for cost to the
consumer. At this stage the Government does not see a case for reducing the Administrative
Strike Price for floating offshore wind compared to AR6 (£176/MWh 2012 prices, equivalently
£245/MWh 2024 prices), subject to further analysis and a final decision on contract length.
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“AR7 Changes Show Net Zero is Not Working
The Government is working to change the rules of Allocation Round 7 and for Drax so we pay more subsidies for “cheap” renewables.”
https://davidturver.substack.com/p/ar7-changes-show-net-zero-is-not-working
We are all supposed to believe that offshore wind is nine times cheaper than gas and we can become the Saudi Arabia of Wind if we just build more of these magic windmills. Nobody has ever explained why we need annual auctions to decide which projects should be financed by subsidies paid for through our energy bills if wind power is so wonderfully cheap.
The Government is pressing on with its Clean Power 2030 plans to spend £260-290bn by 2030 to save at most £7bn per year on gas for electricity. However, judging by recent announcements about Allocation Round 7 (AR7) Contract for Difference (CfD) auction and the extension of Drax’s tree-burning contract, the plans seem to be hitting the buffers, demonstrating that Net Zero is not working….
...Conclusions
With extra bungs to encourage investment and a new consultation at such a late stage, we know the world of renewables is in trouble. The proposed longer contracts and the apparently inevitable higher prices for floating offshore wind mean our bills are going to continue their inexorable rise. The extension of eligibility criteria to projects without planning permission looks like the Government is struggling to find projects to meet its target of near-quadrupling offshore wind by 2030. While the Government claims that the subsidies due to Drax will halve, the price per MWh is actually going to rise.
We are already seeing the demise of vital industries like steel-making, chemicals, ceramics and oil refining. More expensive, less reliable electricity will only accelerate this de-industrialisation. It is clear that Labour’s Clean Power 2030 plan is in some trouble and Net Zero is not working.
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More news just in from the UK government about AR7 – the gist seems to be to make life better for the renewables companies:
https://allocation-cms-eu-west-2-files20240731180525306000000004.s3.amazonaws.com/documents/2025-03-07_FINAL_AR7_Consultation_Stakeholder_Webinar.pdf
This section caught my eye, and comes as no surprise, since the greedy renewables sector have been actively lobbying for it:
Increasing the contract term for future CfD projects
Objective
‒ Consider the merits of increasing the current 15-year CfD term, ensuring renewable
capacity is secured as cost effectively as possible.
Policy Context
‒ In 2013, the Electricity Market Reform (EMR) concluded that 15 years was optimal.
‒ This assessment may now have changed due to advances in technology, greater
decarbonisation ambition, global cost pressures and higher consumer bills.
‒ There are risks to implementing longer contracts which could be at the expense of the
consumer in the long-term.
Proposal
‒ To reassess the 15-year CfD term to gather the evidence needed to assess whether any
change in this space would be in the interest of consumers.
‒ We will use your responses to determine:
‒ case for intervention
‒ length of term
‒ technology eligibility
‒ indexation
My money is on the extension going through, and it being decided that it won’t be at the expense of consumers in the long-term after all, or that if they do concede those extra consumer costs, they will be deemed acceptable because the ends (decarbonising the grid by 2030 and net zero Nirvana) justify the means.
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I have been watching with interest the debate about zonal pricing, without as yet coming to any conclusion. However, I thought this was interesting:
“Zonal electricity pricing plan could add £3bn a year to GB bills, report finds
Research finds proposal may also drive up cost of building new windfarms as developers need higher subsidies to offset cost”
https://www.theguardian.com/business/2025/apr/03/zonal-electricity-pricing-plan-could-add-3bn-a-year-to-gb-bills-report-finds
Plans to overhaul England, Wales and Scotland’s electricity market risk piling an extra £3bn on to household energy bills every year until the 2040s, according to the government’s own clean power adviser.
New research has found that moving ahead with a plan to divide the national electricity market into different pricing zones could drive up the cost of building new windfarms as the government aims for a renewable energy boom before the end of the decade.
Ed Miliband, the energy secretary, hopes to double Great Britain’s onshore wind capacity, triple solar and quadruple offshore wind farms to help create a clean power system by 2030.
But uncertainty over the plans for “postcode electricity pricing” could mean that developers of renewable energy demand higher subsidies to offset the risk, according to the research, which could raise household energy bills or even delay clean energy investments.
The report by the UK Energy Research Centre (UKERC) warned that an upcoming auction for renewable energy subsidy contracts could clear at £20 per megawatt-hour higher than expected if the zonal market plans were adopted.
The independent centre, which is backed by government funding, said that the higher cost of the 15-year contracts, which are paid for through energy bills, could wipe out any benefits of the scheme.
The report was co-authored by Prof Rob Gross, a UKERC director who was recently appointed to the government’s clean power 2030 advisory commission. It was quietly published weeks before the government is expected to make a decision on the scheme….
The other interesting thing is that the Guardian has apparently conceded that CfDs are renewable energy subsidy contracts [my emphasis]. This is something that supporters of renewables are notoriously reluctant to acknowledge.
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“Row erupts over offshore wind farm contract competition rules
Government plans to let projects that have not got planning consent compete for subsidy contracts”
https://archive.ph/3hoXO#selection-1401.0-1405.97
A row has broken out in the renewables industry over government plans to offer subsidy contracts to offshore wind farm projects that are yet to gain planning consent.
Ministers are considering implementing the change in coming months, enabling earlier-stage projects to compete for funding contracts against those that have already gained planning permission and are ready to build....
...Holger Grubel, vice-president of offshore portfolio development at EnBW said: “We’ve already invested more than £1.7 billion developing our Morgan and Mona wind farms, moving at a pace that hasn’t been seen in the UK before, with these projects ready to connect three gigawatts of clean, domestic power from 2030.
“Allowing mature projects like ours to participate in AR7 would increase competition, minimising the risk of an unbalanced concentration of incumbent developers in the auction, ensuring the CfD scheme delivers real capacity, at pace, and at the best value for consumers.”…
…However, Tom Glover, UK country chairman of RWE, said: “Relaxing eligibility criteria to allow offshore wind projects without planning consent to bid into CfD auctions will create significant new risk and uncertainty for investment, project delivery and supply chain development, damaging investor confidence in the UK, leading to lower spend in the future and undermining the government’s growth and clean energy ambitions.”…
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“Total CfD Subsidies Hit £10bn
As the costs of CfDs hit near record high in FY2024/25, the outlook is for even higher subsidies.”
https://davidturver.substack.com/p/total-cfd-subsidies-hit-10bn
…Financial year 2024/25 was the second most expensive year so far, with total subsidies reaching £2.24bn. Offshore wind received slightly less subsidy (£1.68bn) than the prior year (£1.72bn). The biggest driver of extra subsidy in 2024/25 was biomass conversion, a euphemism for burning trees. Biomass subsidies including biomass with CHP were £500m, up from £19m in the prior year. Onshore wind received £58m and the solar farms with active CfDs received almost £0.6m…
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“The Great Hornsea Project Three Cover UpConspiracy of silence from DESNZ, NESO and LCCC about the AR6 contract awards to Hornsea Project Three”
https://davidturver.substack.com/p/great-hornsea-project-three-cover-up
Conclusions
The general public is paying the electricity bills that finance this fiasco and should be able to find out how and why this happened. Other offshore windfarm operators should be outraged too because Orsted appears to have been given preferential treatment. Instead, we have the absurd situation where it is deemed too commercially sensitive to release information that might shed light on what has happened. Or alternatively, too embarrassing for the LCCC to disclose the concerns their staff might have had signing off on such dodgy arrangements.
We can only hope that the ICO sees through this charade and forces the great Hornsea Project Three Cover Up to end.
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H/T MikeH on Open Mic:
https://davidturver.substack.com/p/total-cfd-subsidies-hit-10bn
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Here’s the latest on CfDs:
“Contracts for Difference for Low Carbon Electricity Generation
Government response to the legislative proposals in the consultation on further reforms to the Contracts for Difference scheme for Allocation Round 7″
https://assets.publishing.service.gov.uk/media/6814b6ff359707ba3d446767/cfd-scheme-proprosals-ar7-government-response-legislative-amendments.pdf
It all seems very low key. I can’t see anything about the possibility of extending the current 15 year terms to 20 years. But that’s not to say that it won’t happen.
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“CfD Subsidy Rates Climb in April 2025
Overall CfD subsidies for April 2025 were much lower than last year, what is going on?”
https://davidturver.substack.com/p/cfd-subsidy-rates-climb-in-april-2025
At first blush, the second line of the headline might appear to vindicate the government’s push for renewables and it’s AR6 strategy. Read the article, however, and the opposite is true. CfD subsidies fell only because of the surprisingly poor performance of wind farms, both on- and off-shore. Well worth a read:
…The biggest driver of lower subsidies is lower generation. Production of electricity from offshore wind in April 2025 at 1,263GWh was much lower than last year’s 2,237GWh and lower even than April 2023 when 1,287GWh were produced…
…This ought to be worrying for the offshore wind industry because since April 2023 three new offshore windfarms have come online. Hornsea Project Two and Moray East activated their CfDs in March 2024 and Neart Na Gaoithe (NNG) came online part way through April 2025. More generators coupled with reduced output is not a good sign for offshore wind economics.
Onshore wind generation in April fell too compared to last year. Solar generation increased substantially from 2.7GWh in April 2024 to 16.9GWh in April this year. This can be explained by the recent activation of the CfDs for five new solar farms since April 2024. However, CfD solar generation remains a trivial amount of overall output.…
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But will the general public ever be made aware of this by the MSM?
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AR7 seems to be a long time in arriving. I suppose that might have something to do with the problems associated with the process, given the numbers of developers now dropping out. In any event, some more news has been released by the government:
“Government Publishes Consultation on Potential Technical Amendments to the CfD Scheme”
https://www.cfdallocationround.uk/news/government-publishes-consultation-on-potential-technical-amendments-to-the-cfd-scheme
The Government has published a consultation, seeking views on potential drafting changes to the Contracts for Difference (CfD) Standard Terms and Conditions (STCs) in advance of Allocation Round 7 (AR7), which is scheduled to open in summer 2025.
The proposed changes concern potential amendments to the CfD STCs for practical implementation of the proposal to relax eligibility requirements for unconsented fixed-bottom offshore wind projects, should the Government decide to proceed with the policy. The potential scheme changes set out in this consultation are without prejudice to a final Government decision on whether to proceed with this policy, which will be confirmed ahead of AR7….
…A government response to this consultation will be published before Allocation Round 7 opens in Summer 2025.
More information here:
https://www.gov.uk/government/consultations/allocation-round-7-potential-eligibility-changes-for-fixed-bottom-offshore-wind
The AR7 timetable can be found here:
https://allocation-cms-eu-west-2-files20240731180525306000000004.s3.amazonaws.com/documents/250529_Indicative_AR7_Timetable_.pdf
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“Miliband Expands CfD Subsidies in AR7
Extended contracts and relaxed eligibility criteria will line the pockets of renewable energy developers with gold”
https://davidturver.substack.com/p/miliband-expands-cfd-subsidies-in
…Overall, it appears that Miliband is desperate to secure the maximum renewable capacity in AR7 and is willing to sacrifice consumer bills by lining the pockets of renewables developers with gold. In effect, he is trying to get as much capacity under contract in AR7 to make his Clean Power 2030 plan irreversible, even if he loses his job. This will set in stone crippling energy bills for decades to come….
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Mark, at last Miliband has called for more gas-power plants:-
However, I have not understood under what conditions these gas-turbines (if and when they arrive) will operate. If they are just to back-up wind/solar then their operators are going to require large £/MWh to make it worthwhile making the investment; in that sense (but only that sense) they will be very like wind/solar i.e subsidies for the plant that would not need subsidies if it were not for the plant that does! That is the genius of the magical thinking which has brought us to this present state. Praise the CCA! And NZ!
Regards, John C.
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The Government has published its final response to the amendments proposed in the further reforms to the CfD for AR7 consultation.
The Government response confirms its decision to:
https://www.cfdallocationround.uk/news/ar7-update-further-reforms-to-the-contracts-for-difference-scheme
The long-winded version (which might be worth reading, since the devil is always in the detail) can be found here:
https://assets.publishing.service.gov.uk/media/68766d6e88da2e5804bb6a94/cfd-ar7-consultation-final-government-response.pdf
The introduction alone is enough to demonstrate that it will be dangerously deluded stuff that isn’t likely to be good for us:
Our mission to make Britain a clean energy superpower is about getting off the rollercoaster of
fossil fuel markets controlled by petrostates and dictators with clean homegrown power that we
control. The Contracts for Difference (CfD) scheme is central to securing the investment in
clean power that we need, at the speed and scale required.
We know that clean power by 2030 is the route to building a more secure energy system that
can bring down bills for good. Our priority is to deliver at least cost to billpayers and taxpayers
and the most economic benefit to the country. As we do so, we know the next few CfD
allocation rounds will be particularly important in ensuring we build the clean energy
infrastructure we need at the best possible price for consumers.
The reforms we are setting out today represent an important step forward for our mission. By
securing investment in renewable energy at competitive prices, we will increase our energy
independence, protect billpayers, create good jobs and drive growth around the country.
Ed Miliband
Secretary of State for Energy Security and Net Zero
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“clean homegrown power that we control” – a sure sign that Ed and his minions are dangerously out of control. This is not a definition of wind and solar, since we will be dependent on China for them.
Meanwhile, Reform’s Tice is trying to put wind farm operators off AR7 by promising to pull their subsidies if they win the election.
“Reform warns wind farm builders it would scrap their subsidies”
Telegraph link.
Of course, it’s a great idea, but the legal protections of the wind farms will make it impossible to pull their noses out of the trough.
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In the unlikely event that Reform UK for a majority government after the next general election, they will need to get smart if they are to avoid successful legal challenges. I provisionally think they might do well to contemplate a 100% windfall tax on the full value of all renewables subsidies.
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On PM yesterday, Tice came on to say he was not talking about cancelling contracts, but about resisting “variations” in the existing contracts as demanded at times by wind farm developers. In other words, if a certain strike price is agreed, then the developer cannot come back for a higher strike price later, as we know has happened.
However, nothing compels the company involved to build turbines and sell leccy at a loss, so they will just walk under those circumstances.
He did not say what shenanigans exactly he was referring to, but others we have seen, like deferring activation of a CfD, are presumably written into contracts and would not count as variation.
Mark’s idea of a windfall tax was not mentioned as a potential way of clawing back subsidies.
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Jit,
I heard the interview and agree absolutely with your summary of what Tice said. He seemed to me to be rowing back from this part of his letter: ““We will seek to strike down all contracts signed under AR7.”.
From AR5 onwards I believe that the contracts were tightened up so that they are no longer one-way options, but actually are contracts the government can enforce. I think that’s why AR5 was such a failure – the prices on offer were too low (because the – then Tory – government believed its own inaccurate propaganda about constantly falling renewables prices) and the renewables companies weren’t going to sign up to low prices that could be held against them. That’s why AR6 prices were considerably inflated, and no doubt AR7 prices will be even higher. So much for reducing bills.
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“Labour MPs challenge Richard Tice over Reform UK’s plan to scrap green projects
Exclusive: Letter signed by 59 MPs criticises party’s deputy leader after his warning to energy firms over new contracts”
https://www.theguardian.com/politics/2025/jul/18/labour-mps-challenge-richard-tice-reform-u-plan-scrap-green-projects
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Mark – thanks for the link. Partial quote –
“In their letter, the Labour MPs asked Tice if he was aware that such contracts were not made with the government, but with the Low Carbon Contracts Company, a private company owned by the Department for Energy Security and Net Zero.
They said: “This means a potential future Reform UK government would not have the ability to ‘strike down’ any contracts signed through this process, unless you are willing to destroy investor confidence in the whole of UK industry by ripping up contract law. Can you confirm if it is Reform UK policy to rip up contract law?””
So it seems that a “private company owned by the Department for Energy Security and Net Zero.” can make binding contracts, that future governments have to honour like them or not.
Have I missed something?
PS – ties in nicely with John Cullen’s “Bureaucracy” post & comments below regarding “Democracy” if this is the case.
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dfhunter,
It’s a deflection technique by a very worried establishment. The LCCC acts on Government orders and – as you and the article makes clear – is wholly-owned by the government.
The implications for democracy are interesting – is it more democratic that a government elected by the people can bind a successor than that a successor elected by the people can overturn a long-term contract made at the behest of its predecessor?
I remain of the view that as Parliament is supreme, a successor government can – if it can achieve a majority in Parliament – overturn the contracts by legislative means. However, this would amount to retrospective legislation, which is generally regarded as unconventional, though that would be open to challenge. Rather than face numerous challenges through the Courts, the smart move would be to introduce a windfall tax – given the behaviour of this Labour government and the last Tory government where windfall taxes are concerned, who could possibly object to that?
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David Turver on AR7:
Note that the guaranteed contract period is being increased from 15 to 20 years.
Prices for Fixed Bottom Offshore wind are up 11% to £117/MWh, Floating Offshore wind up 10.2% to £280/MWh, and onshore wind up 3.1% to £95/MWh. Offer prices for solar have dropped by 11.5% to £78/MWh. Note that DESNZ provided a table in 2012 and 2024 prices, but for the comparisons below, it is better to show prices in today’s money, so an inflation factor of 1.4434 has been applied to the 2012 prices, in-line with the indexation on current CfD contracts…
…These staggering prices do not include the extra costs of grid balancing and backup that currently cost an extra £32/MWh, nor the costs of the grid expansion to connect them that Ofgem says will cost £80bn and add £74 to our electricity bills by 2030...
…Last night, the day ahead price of electricity was £73/MWh including carbon taxes. This is lower than the current strike price of all the renewables technologies and much lower than the full cost of renewables taking account of the extra costs identified above….
…If this auction is allowed to go ahead, electricity prices will go up even further which will be catastrophically bad for the economy….
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“Government to pay more for wind generated energy”
https://www.bbc.co.uk/news/articles/cly8ynegwn4o
Wrong, BBC – taxpayers and energy users to pay more for wind-generated energy.
There – fixed it.
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Amid the furore about Richard Tice’s letter to the renewable energy companies regarding possibly not honouring contracts for difference subsidy arrangements, and a general abhorrence of retrospective legislation, what follows is interesting. Admittedly, this is only speculation at this stage, but should it come to pass, it’s difficult to see how the government could continue to complain about Tice’s letter and Reform’s plans:
“Rachel Reeves considers overruling supreme court in £44bn car finance scandal
Exclusive: Chancellor could step in if justices uphold entirety of ruling over commission paid to brokers”
https://www.theguardian.com/business/2025/jul/25/reeves-retrospective-legislation-potential-supreme-court-ruling-44bn-car-finance-scandal
…Crucially, the Treasury is understood to be weighing whether the new laws could be retrospective, meaning they would cover old cases and contracts and therefore slash a potential £44bn compensation bill for lenders such as Lloyds, Santander, Barclays and Close Brothers.
Retrospective legislation would also ensure the scandal does not balloon beyond car loans, and potentially expose lenders to complaints over commission payments across other financial products, like appliances and furniture….
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“Allocation Round 7 Application Window Open”
https://www.cfdallocationround.uk/news/allocation-round-7-application-window-open
The application window of the Contracts for Difference (CfD) scheme has opened today (7 August 2025).
The CfD scheme is vital to our mission to make the UK a clean energy superpower and we aim for this round to be the biggest ever – with AR7-AR9 being crucial to delivery of our mission of clean power by 2030 and protecting households from volatile fossil fuel prices.
The CfD and its predecessor investment contracts have already delivered 10GW of renewable capacity, with a further 23GW contracted to become operational by 2030.
The application window will be open until 27 August 2025. Applications may be submitted via NESO’s EMR CfD Portal. Guidance on the application process is available via the publications page of this website.
AR7 will run to one of five potential timeline scenarios depending on whether there are any appeals following assessment of the submitted applications. Dates for results from the round can be found in the timetables via this link here.
Updates on AR7 will be published on this website as the round progresses.
A couple of observations:
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“German wind auction flop sparks fears for Miliband’s UK sale
Energy Secretary prepares to offer lucrative support from taxpayers to attract investors”
https://www.telegraph.co.uk/business/2025/08/07/german-wind-auction-flop-sparks-fears-for-milibands-uk-sale/
A German offshore wind auction has received no bids after developers baulked at the low subsidies, just as Ed Miliband prepares to offer lucrative taxpayer support in Britain to avoid a similar flop.
The Federal Network Agency offered up plots in two areas of the North Sea, which authorities were hoping could host wind farms that would have opened in the early 2030s.
But the competition was snubbed by developers, with an industry association claiming the result was a “clear message” that Germany’s government needed to stump up more cash.
Stefan Thimm, of the German Offshore Wind Energy Association, said: “The German offshore wind market is currently not attractive to investors. The federal government is thus missing the opportunity for significant value creation and employment in Germany and Europe.”
The failed auction came as Britain quietly launched its own similar auction on Thursday, with Mr Miliband, the Energy Secretary, expected to offer bumper subsidies to attract enough wind farm capacity to meet his clean power targets.
The German results underscored the difficulties being experienced by Europe’s offshore wind industry, which has been buffeted by rising costs and interest rates in recent years. That has squeezed the profitability of projects, making them more reliant on top-ups from government subsidies.
However, the precise level of state support has proved a sticking point. Britain’s own wind auction received no bids in 2023 after ministers initially refused to raise the subsidies on offer. They later backed down, with Mr Miliband overseeing a record £3bn of contract for difference (CfD) awards last year.
He has since reformed CfDs, which guarantee wind farm revenues, so that they last 20 years instead of 15. The costs are added to the bills of consumers, who will end up paying them until the 2040s.
This year’s auction round in the UK, known as AR7 to the industry, is viewed as critical because it is the last time the Government can realistically attract new capacity in time for the 2030 clean power targets, given the time it takes to construct a wind farm.…
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I remember Germany being the example the usual MSM suspects held up as the way the UK needs to go. Well, this biased & cr*p article makes my point – Germany’s disappearing green agenda – POLITICO – reality is hitting.
But Ed will never learn it seems.
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From David Turver’s substack:
The CfD results for July are in. We paid £154m in subsidies. Second highest July on record, after July 2020 when subsidies cost £173.5m. Nearly £100m to offshore wind and £51m to various forms of biomass.
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Latest CfD Updates:
Allocation Round 7: revised timeline for offshore wind technologies – fixed bottom and floating offshore wind
There are non-qualifying applicants in AR7 for OFW and FLOW, which means AR7 will not run to the shortest timeline. To provide timeline certainty and support delivery of AR7 results as soon as possible, we are confirming our intention to move now to a single timeline from now onwards, set out below. All previously published timeline scenarios no longer apply. This means that in all scenarios, the sealed bid window for all OFW and FLOW applicants will be open from 11- 17 November, and OFW and FLOW results will be published on 14 January. We believe providing clarity of a single timeline is more effective than providing different scenarios for different appeals stages.
This timeline may or may not rely on the use of the Pending Applications process set out in the CfD Allocation Regulations 49-51. If Ofgem receives a request for a Tier 2 appeal, the Secretary of State will consider using the Pending Applications process to progress the auction. Any applicants with a Tier 2 appeal will be able to submit their bid and their participation in the allocation round will be confirmed by Ofgem by 28 November. Any appellant deemed eligible to participate in the allocation round will have their bid included in the allocation process.
For all non-offshore wind technologies it appears we, the public, may learn the outcome some time between December 2025 and early March 2026.
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https://www.gov.uk/government/publications/contracts-for-difference-cfd-allocation-round-7-statutory-notices
https://assets.publishing.service.gov.uk/media/68ff773ea50917eae8b48371/cfd-ar7-contract-budget-notice.pdf
The administrative strike price available for offshore wind has been published, and I am pleased to say, it’s in 2024 prices, rather than as heretofore in 2011/12 prices. This has the double benefit of meaning we don’t need to work out what the current-day price is, and it also avoids misleading those members of the public who didn’t understand that the prices quoted to date were based on 2011/12 prices.
The Government offer, then, is £113 per MWh for fixed offshore wind and the absurd £271 per MWh for floating offshore wind. Bids are now invited, and the declared pot of fixed offshore wind is £900 million p.a., and for floating offshore wind is £180 million p.a. The Guardian reports on these developments here:
“Ed Miliband says £1.1bn a year to be set aside for new offshore wind projects
Final budget could rise if ministers see value for money, as industry lobby group says investment not enough”
https://www.theguardian.com/environment/2025/oct/27/ed-miliband-1-1bn-a-year-new-offshore-wind-projects
It’s interesting to note that the Guardian reports that the renewables industry body is already complaining:
…However, RenewableUK, an industry lobby group, said the budget would cover only about a quarter of the 20 gigawatts of projects that have planning permission and would be eligible. Ana Musat, the group’s executive director of policy, said: “The budget announced today will not maximise investment in new offshore windfarms.”…
These represent significant price hikes compared to AR6, but because AR6 quoted in 2011/2012 prices, direct comparison isn’t easy. Maybe that’s why the government chose to change the way pricing is expressed!
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Alternative reporting of the latest development can be found here:
https://renews.biz/103868/uk-sets-ar7-offshore-wind-auction-budget/
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“Miliband’s AR7 Budget Destroys His CP2030 Plan
The AR7 Budget for offshore wind will not deliver CP2030 but will impoverish us all.”
https://davidturver.substack.com/p/milibands-ar7-budget-destroys-cp2030-plan
The article helps to unpick the complexity and explain the development in relatively simple terms, and is worth a read.
...Conclusions
There is simply no chance that Miliband is going to achieve his CP2030 plan. Nowhere near enough capacity is going to be contracted in AR7 to achieve his target.
However, he is pressing on with AR7 and offering ridiculous prices to developers in new index-linked contracts with extended 20-year terms. There is no chance he will achieve his plan, but every chance he will bankrupt the nation in the process.
AR7 needs to be stopped. Now.
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“Experts say Ed Miliband’s £1.1bn for new offshore wind projects not enough
One energy industry source says they expected an annual budget as high as £2bn to meet UK’s green energy targets”
https://www.theguardian.com/environment/2025/oct/27/ed-miliband-1-1bn-a-year-new-offshore-wind-projects
…Some energy industry experts raised questions over whether the budget would allow for enough generation to keep the UK on track for decarbonising electricity generation by 2030. One said they had expected a budget as high as £2bn to hit the target.…
And once again, the bleating from those who hoped for a bigger trough:
…RenewableUK, an industry lobby group, said the budget would cover only about a quarter of the 20 gigawatts of projects that have planning permission and would be eligible. The group’s executive director of policy, Ana Musat, said: “The budget announced today will not maximise investment in new offshore wind farms.”…
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An update from David Turver – more specifically, he draws our attention to the fact that an update from the government is overdue:
“What is Happening in AR7?
No announcement of auction or sealed bid window”
https://davidturver.substack.com/p/what-is-happening-in-ar7
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Some more AR7 CfD information has recently emerged:
https://assets.publishing.service.gov.uk/media/6936af01a6fc97b81e57434b/cfd-ar7-second-contract-budget-notice.pdf
In 2024 prices, large onshore wind strike prices are £92 MWh, and large scale solar at £75. Hydro is £168 and some other biomass and more obscure sources are £200+.
So much for cheap renewables.
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“Proposed refinements for Allocation Round 8 and future rounds”
https://www.gov.uk/government/consultations/proposed-refinements-for-allocation-round-8-and-future-rounds
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