Auctions to fund renewables increased to every year to boost green energy

The Government has announced annual renewable energy auctions to boost the rollout of clean power sources such as offshore wind.

Auctions in the “contracts for difference” (CfD) scheme which supports the development of wind and solar farms will change from one every two years to every year from March 2023, officials said.

Business Secretary Kwasi Kwarteng said the move to increase the frequency of auctions for clean power would reduce the UK’s exposure to expensive gas prices set by international markets.

The auctions see companies bidding for funding that gives them a guaranteed price for the power they will produce from low-carbon technologies, with the lowest prices winning the contracts which then enable the scheme to be developed.

It is the main way the Government now supports renewables, and has helped drive down the price of offshore wind significantly.

Increasing the frequency of auctions aims to drive the development of more renewable power, including onshore wind and solar which were excluded by the Government from the scheme for a number of years, as well as offshore wind.

It is part of the Government’s efforts to put the UK on the path to cutting greenhouse gas emissions to zero overall, known as “net zero”, by 2050, which is needed to curb dangerous climate change.

The contracts are paid for through bills, but because they stipulate a specific price for electricity from clean schemes, if the wholesale price of power goes above that level the producer pays back money to the consumer.

Offshore wind farms paid back nearly £117 million for the final three months of last year, while onshore producers returned more than £40 million, as electricity prices soared because of high global gas prices.

Mr Kwarteng said:  “We are hitting the accelerator on domestic electricity production to boost energy security, attract private investment and create jobs in our industrial heartlands.

“The more clean, cheap and secure power we generate at home, the less exposed we will be to expensive gas prices set by international markets.”

Dan McGrail, chief executive of RenewableUK, said: “Moving to annual CfD auctions is a major step forward which will significantly accelerate the speed of our nation’s transition to net zero.

“It’s good news for consumers too, as it means the UK will be reducing its vulnerability to volatile international gas prices and increasing the volumes of low-cost renewable energy in our energy system.

“There’s a huge appetite among renewable energy developers to invest in building more projects, which will help to grow the UK supply chain at a faster rate.”

A draft budget of £285 million has been set for the fourth contracts for difference round, which is under way, with the lion’s share earmarked for offshore wind.