Contracts for difference signed by auction winners

Redruth energy-from-waste project turns down contract due to technology change

All but one of the winning projects from the second round of the government's Contracts for difference subsidy scheme have signed their contracts.

The Redruth energy-from-waste plant was the only successful project not to sign a contract within the allotted ten-day window since the auction, according to the Low Carbon Contracts Company (LCCC).

Ten winning projects have signed a total of 16 CfDs. The developments include: three offshore wind farms, each with three phases and three corresponding contracts; five energy-from-waste (EfW) schemes; and two biomass projects with combined heat and power.

LCCC chief executive Neil McDermott said: “We are delighted to welcome these new projects, which increase the total low carbon capacity of our portfolio to over 13GW, meaning projects with CfDs could be powering around 14 million homes by the end of 2025.” 

The first major deadline for the projects will be the milestone delivery date in October 2018.

“To get through that, they can either spend ten per cent of the total pre-commissioning costs - that’s an amount provided in the contract - or they have to go down what’s called the project commitments route,” McDermott told Utility Week.

“That includes signing a number of major contracts for the project. After that they have a target commissioning window.”

“One of the things we encourage them to do is get an early start and not leave it,” he added. “We’ll be working with them to make sure that they understand exactly what they’ve got to do.”

McDermott welcomed the low strike prices achieved by offshore wind projects in the second auction in September, saying: “It’s good news for the CfD. It shows there’s a high level of interest; good competition.  It’s an investable contract.”

LCCC head of strategy Ruth Herbert remarked: “As the price comes down, you hear people saying: is there going to be market stabilisation CfD? Can you have CfD which is the same price as the market?

“Let’s see, because I don’t think that means you don’t need a CfD necessarily. What we hear is that the CfD is crucial to securing finance and at lower costs, which is good for consumers.”

Herbert added that the process has been running smoothly and the LCCC's efforts to make improvements have been mainly focused around tightening up guidance: “In a number of areas, we’ve established guidance which is based on what we learnt in the first round. We’ve made it a lot easier for second round applicants because we’ve got that all ready.

“They don’t have to sign a contract and then think what’s next, because they now know what’s coming next.”

Redruth EfW turned down its contract having secured the lowest strike price in the auction at just £40/MWh.

Explaining the decision, the company said in a statement: “Following a change in selected technology, Redruth EfW are now developing a project which is not eligible for support under the CfD”.

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