Contracts for Difference (CfD) Allocation Results

Ben Guest, Managing Director, Gresham House New Energy, comments on the result of the UK Government’s bi-annual contracts for difference (CfD) auction, a forum for offshore wind subsidy-granting.

The auction resulted in a huge 5.5GW of offshore wind projects being granted contracts for commissioning between 2023 and 2025. This represents a dramatic increase on previous years – 2.1GW of projects were awarded contracts in 2015 and 3.3GW in 2017.

“The result of the latest CfD auction is a strong endorsement of the continued success of the British offshore wind industry.

The sharp increase in commissioning contracts is largely a result of offshore wind project costs dramatically falling, which in turn reduces the power price they require to earn their target return.” 

For instance, the lowest wind power prices in 2015 were £114/MWh but this year it is just a fraction of that at £39.65/MWh.

If project costs continue their downward trajectory, we can expect even more offshore wind projects to be allocated at the next CfD auction.

“The decreasing costs to build new renewable energy assets in the UK will lead to a significantly higher deployment of renewables in the UK than government forecasts predict.”

“To support this transition to renewable energy sources, significant investment is needed in grid-scale battery storage, as growth in intermittent renewables increases the variability of power supply. Battery storage addresses this challenge very effectively by absorbing or releasing power. The transition to renewables can only continue cost-effectively with the support of battery storage.”

You can view the full rundown of the CfD Round 3 results on the gov.uk website >>.

More information about the Gresham House Energy Storage Fund:

• Launched in November 2018, raising £100m
• Established to deliver returns from investing in utility-scale energy storage systems
• Has since raised an additional c.£65m, meaning a total of approximately £165 million of gross proceeds from investors
• Currently invested in six energy storage projects with 75MW of capacity. The manager expects the fund to be fully invested in nine energy storage projects by the end of the first quarter of 2020, with 229MW of capacity
• An opportunity to invest in a tangible asset whilst contributing to the UK’s clean energy transformation