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Solar sector hails increased support scheme budget

Solar Energy UK
31 July 2024

More investment into solar energy can be expected following today’s Government announcement on support for the sector.

The Department for Energy Security and Net Zero has given a budget of over £1.5bn for the sixth allocation round (AR6) of the Contracts for Difference (CfD) scheme, over 50% more than the previous round.[1]

The bulk of this will back offshore wind generation, responding to no bids being made by the sector in the fifth round last year.[2] However, the budget for ‘Pot 1’ for established technologies such as ground-mounted solar power has been raised by more than half, from £120m to £185m (in 2011/12 prices).

“This is further very welcome news for the solar sector, following yesterday’s consultation on planning rules and the approval of three large-scale solar farms only a week after the election,” said Chris Hewett, Chief Executive of Solar Energy UK.[3,4] “While all depends on the results of the coming auction, the increased allocation should allow many more projects to go ahead, driving down carbon emissions and energy bills alike”.

Successful bidders for CfDs receive a fixed ‘strike price’ for renewable energy generation, lowering the risks faced by developers from the varying wholesale price of power while ensuring that there is an incentive for investment. So the budget for AR6 should not be understood as a spending commitment, as payments will vary from time to time.

Furthermore, the scheme should also not be considered as a subsidy: when the wholesale cost of electricity is higher than the strike price from successful bids, as has been the case in recent years, the Exchequer receives the difference between the wholesale and strike prices. This cuts the costs of the scheme while still delivering on its aims.

The maximum strike price for solar power in the coming AR6 auction is £61/MWh, again expressed in 2011/12 terms. While raised due to the impact of inflation, it is still lower than any other technology, reflecting again the value presented by expanding solar generation.[5,6]

[1] Record breaking funding for clean energy in Britain

[2] Solar secures more Contracts for Difference than expected

[3] Planning consultation brings clarity for solar projects

[4] Industry lauds approval of three large-scale solar farms

[5] Large-scale solar provides cheapest power, says Government report

[6] Support scheme rise is boost for solar sector

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Editor’s notes:

For more information or to request an interview, please contact:

Gareth Simkins, Senior Communications Adviser

gsimkins@solarenergyuk.org

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