Interim energy and clean growth minister Chris Skidmore has said the government will not increase the 6GW capacity cap for the upcoming contracts for difference (CfD) auction.
Skidmore was responding to a written question in the House of Commons from Labour MP Julie Elliott, who asked whether the cap might be raised in the light of the government’s new commitment to reduce greenhouse gas emissions to net zero by 2050.
“Based on our understanding of the pipeline of projects, we have set the level of the capacity cap to promote competitive tension, whilst delivering significant capacity, and ensure smooth delivery of low carbon generation through the 2020s,” replied Skidmore.
SSE has also written to the minister to request an increase. Chief executive Alistair Philips-Davies said: “The net-zero commitment is a positive development, but none of us should underestimate the scale of the challenge that it poses.
“Offshore wind will play a crucial role in providing affordable low carbon power and the Committee on Climate Change (CCC) has suggested 75GW of offshore generation may be required by 2050, compared to 8GW today and 30GW targeted by the government’s sector deal for 2030. Increasing offshore capacity in line with the CCC advice is challenging but achievable.
“Increasing the 6GW cap provides government with an opportunity to show that it is serious about net zero and positioning the UK as a world leader in both the offshore wind sector and the fight against climate change. It can do this in a way which is quick, simple and cost neutral for consumers.”
Up to £65 million of annual subsidies are being made available as part of the third competitive CfD allocation round, which began in May.
According to industry experts, the rapidly falling costs of offshore wind means the seemingly small budget may be less constricting than it initially appears. Strike prices would not need to fall far below the caps of £56/MWh and £53/MWh (depending on the commissioning year) to reach subsidy-free rates, at which point the capacity cap would become the only limit on procurement.
The Conservative Environment Network recently launched a new manifesto, which called for the UK to become the “Saudi Arabia of wind power” by installing 75GW of offshore wind capacity by 2050.
Operational capacity in the UK currently stands at nearly 8.5GW.