Ed Miliband has announced that the budget for this year’s renewable energy auction (CFD) is being increased by £500 million to over £1.5 billion – providing a major boost for a variety of green industries in Wales.
Wales is already positioning itself as a global leader in terms of tidal stream technology and this funding uplift could help continue this trajectory.
The funding will accelerate the delivery of clean, cheap, low-carbon electricity, generated by renewable energy technologies.
This includes £1.1 billion for offshore wind, which has more budget available than all of the previous auctions combined, sending a strong signal to industry to invest in UK waters.
The budget for this latest round, known as Allocation Round 6 (AR6), was already the largest announced for a single CFD auction round when it opened for bids from developers in March.
The uplift comes on the day of the first meeting of the Clean Energy Mission Board – chaired by the Energy Secretary and attended by Ministers from across Whitehall – as part of plans for a mission-driven government. The board will meet to ensure a relentless focus on delivering the mission of clean power by 2030 and accelerating towards net zero.
The funding will be split into ‘pots’ representing different energy types.
- Tidal stream, wave energy and floating offshore wind (FLOW) will all compete in Pot 2 of the allocation, which has increased by £165 million – from £105 million to £270 million.
- The Department for Energy Security and Net Zero also confirmed the previous £10 million ringfence for tidal stream technology will be increased to £15 million – making AR6 the UK’s third consecutive auction with funding specifically set aside for tidal stream.
Last year, in Allocation Round 5, 11 tidal stream projects, four of which were in Wales, were awarded contracts, securing over 50MW of capacity, 22MW in Wales.
The results of the next CfD allocation round are expected in September.
Commenting on the increased budget of £1.5bn for the UK Government’s green energy auction, Jessica Hooper, RenewableUK Cymru Director said:
Renewable energy can be the engine that drives growth and wealth creation in Wales, and as a new, emerging technology, floating offshore wind is the jewel in the crown we need to succeed in Wales. It is our opportunity to kickstart a burgeoning new industry that unlocks thousands of jobs and puts us at the helm of our own homegrown, clean power.While most government contracts from this latest clean energy auction will be available to develop fixed offshore wind power, we welcome the budget uplift from £105 million to £270 million for emerging technologies, like floating offshore wind. However, this is still not enough to deliver all eligible UK projects. Moving forward, in future allocation rounds, we need to guard against unwanted regional competition and ensure that as many new offshore windfarms as possible are built, including the test and demonstration sites in the Celtic Sea, to encourage innovation and drive cost reduction.
Energy Secretary Ed Miliband said:
Last year’s auction round was a catastrophe, with zero offshore wind secured, and delaying our move away from expensive fossil fuels to energy independence.
Instead, we are backing industry to build in Britain, with this year’s auction getting its biggest budget yet. This will restore the UK as a global leader for green technologies and deliver the infrastructure we need to boost our energy independence, protect billpayers, and become a clean energy superpower.
Industry will now bid for a share of the funding through the government’s sixth renewable auction – known as the Contracts for Difference scheme – which provides developers with initial subsidies for clean electricity projects across Britain with a built-in design to keep costs low for billpayers.
These subsidies are paid back when wholesale electricity prices are higher than the agreed Contract for Difference price. This was seen over Winter 2022/2023, when Contracts for Difference payments reduced the amount needed to fund government energy support schemes by around £18 per typical household.
The scheme’s design means the central government’s budget will not be impacted, following findings from a Treasury spending audit revealed £22 billion of unfunded pledges inherited from the previous government.
Overall, the funding uplift represents more than a 50% increase on the budget previously set in March, driving clean energy investment in the UK, supporting high quality jobs in industrial heartlands and coastal communities, while protecting household bills from volatile fossil fuel prices.
Tom Hill, Programme Manager at Marine Energy Wales said:
Whilst not the £30m ringfence the tidal stream industry had been calling for, an uplift of £5 million is an extremely welcome and positive step forward for tidal stream technology, which will play a key role in achieving the UK and Wales’ Net Zero ambitions.
An extra £165 million for emerging technologies such as tidal stream, wave and floating offshore wind (FLOW) is significant and has not gone unnoticed. However, competition for this funding is fierce and projects from right across the UK will be competing for a share; including in places like Scotland and the North East of England where supply chains have already been established.
As an industry, we now need to focus on advancing the offshore wind sector in Wales, particularly Test & Demonstration projects in the Celtic Sea, which will incentivise port and supply chain investment here and ensure we don’t miss out on this opportunity.
John Jenkins, director with Menter Môn Morlais said:
This announcement shows the government’s commitment to renewables and their confidence in tidal stream technology. As the largest consented tidal stream project in Europe, we know the important part schemes like ours play in the generation of clean electricity, which will be crucial as we aim for net-zero.
For us on Anglesey there is added significance, as it gives tidal technology developers already committed to Morlais the confidence to plan ahead and to expand their capacity here. I’m certain the move will promote innovation and ensure we remain at the cutting edge of the sector as well as encourage new developers to explore how they can work with us.
As with any project of this scale, we’re on a journey, we know there’s a long way to go to deliver the project’s full potential. We’re determined to be a lead player in this emerging sector so that we can achieve what we set out to do – deliver local benefit and add value throughout the supply chain and for our communities.
And whilst we welcome today’s announcement, there is always more that can be done, so we would call on government to look how it can go further to promote projects like ours at Morlais.
