Solar Energy UK
3 September 2024
Record-breaking results from the latest renewable energy auction round should begin to contribute to lowering energy bills within only two years, says trade body Solar Energy UK.
A total of 93 ground-based solar projects, with a combined capacity of 3,288 megawatts, have secured support under the sixth allocation round of CfDs (AR6). The results were announced earlier this morning by the Department for Energy Security and Net Zero.[1] A total of 884MW has been contracted for delivery in 2026, with 509MW in 2027 and 1,895MW in 2028.
The previous records were set in the fourth allocation round in 2022, when 66 solar projects, coming to 2,209MW, gained CfDs.
Some are among the first with a capacity over 50MW to receive a CfD. EDF Renewables’ Longfield development in Hertfordshire has received a contract for 299MW of its 420MW planned capacity, with INRG Solar’s 150MW Little Crow project in Hertfordshire gaining a CfD for two thirds of its capacity. Both were approved nationally rather than by a local authority.
Cleve Hill (the UK’s first NSIP-scale solar project) was the first to secured a CfD, in round 4. It was for 112MW of its 373MW capacity. CfDs for the three NSIP-scale projects approved by the Government in the summer may be expected next year.[2]
The AR6 strike price for solar farms is £50.07 per megawatt-hour – inflation having barely affected it compared to the £47/MWh price agreed for AR5 last year.
A strike price of £50.90/MWh was reached for conventionally-built offshore wind. As expected, the bulk of the auction the round went to the sector, the Government attempting make up for no CfD bids being made by the sector last year.
The prices for wind and solar power are only a fraction of the wholesale cost of electricity, weekly average forward delivery contracts having ranged between £61 and £87 per megawatt-hour this year.
Further underlining the value of renewable energy, a payment of £92.50/MWh has been offered for the Hinkley Point C nuclear project. Last year, the department put the levelised cost of a new combined-cycle gas asset opening in 2025 at around £114/MWh (equivalent to £82.83/MWh in 2012 – CfD finances are always expressed in 2012 prices).[3]
“Today’s welcome announcements demonstrate yet again that solar and wind power are the cheapest source of power available in the UK,” said Solar Energy UK Director of Policy and Delivery, Gemma Grimes.
“It is hugely encouraging to see an unprecedented volume of solar generation capacity contracted, enough to put a meaningful dent into future electricity prices. Similar levels of contracted capacity will be needed each year to meet our net zero ambitions,” she added.
To reach the Government’s 50GW solar energy target for 2030, an average of 3.3GW of ground-mounted capacity will have to be delivered annually for the rest of the decade – very close to the amount cleared in this year’s auction. Further capacity is expected to be delivered under corporate power purchase agreements, or via selling directly to the grid as ‘merchant’ facilities. An extra 10GW or so is expected to be installed on roofs.
“The CfD system is currently working well for solar. We look forward to future allocation rounds and will work with the Government to deliver the capacity necessary to meet its renewable energy targets. Having greater visibility of future budgets for the years to come would help achieve this,” said Grimes.
[1] Contracts for Difference (CfD) Allocation Round 6: results
[2] Industry lauds approval of three large-scale solar farms
[3] Large-scale solar provides cheapest power, says Government report
– ENDS –
Editor’s notes:
The CfD system lowers financial risks faced by developers by providing a secure and regular income, thus encouraging investment in cheap renewable energy. It is not a subsidy: when the wholesale cost of electricity is higher than the agreed strike price, as has been the case in recent years, the Exchequer receives the difference between the strike prices and the wholesale cost of electricity. This cuts the overall costs of the scheme.
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