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Trend of ‘ever cheaper’ renewables ‘may be at an end’

Maturing technology, combined with mounting pressure on global supply chains, means the previous trend of “ever cheaper” renewables “may be at an end.”

Renewable UK issued the warning as it released a new manifesto for achieving the government’s aim of creating net zero power grid by 2035.

“The ever-downward trajectory of prices can no longer be taken for granted and there is increasing concern about sustainability in the market,” stated chief executive Dan McGrail in the foreword to the report.

The trade body said although the Contracts for Difference (CfD) scheme has been successful in delivering new renewable capacity, the current market arrangements may not be sufficient to fully decarbonise the electricity system by middle of the next decade, as surging global demand for offshore wind is increases competition for investment and puts pressure on supply chains.

It therefore called for an “evolution” of the CfD mechanism as part of the government’s planned Review of Energy Market Arrangements to incentivise long-term capital investment in major projects, build up supply chains and continue the provision of clean electricity at low and stable prices.

The report said this could entail “a shift to a greater focus on payment based on availability to link the mechanism more directly with the Capacity Market and sharpen incentives for generators to respond to short-term market signals.”

The report also urged the government to ensure CfD auction parameters maximise the deployment of low-carbon generation, saying it should work with The Crown Estate to outline forward plan for the 2020s that set outs how the auctions will be aligned with leasing rounds.

It said the functioning of the pot 2 auctions should be reviewed to ensure they are able to support the development of less mature technologies such as floating wind and marine power.

Other recommendations for the government include:

  • Considering the creation of centralised regulatory authority for consenting and licencing to streamline offshore wind development
  • Using the existing Offshore Transmission Network Review to establish a long-term solution for planning integrated offshore grid infrastructure post 2030
  • Leading the development of a comprehensive strategic plan for the marine environment that outlines trade-offs between different seabed users
  • Considering new policies to make the UK more attractive for investment in supply chains, for example, creating offshore wind enterprise zones where businesses can qualify for tax relief or credits
  • Conducting a formal review of how the education and skills framework can support the net zero transition
  • Updating Ofgem’s remit to include a legal duty to deliver the 2050 net zero target
  • Designing the new onshore communities to scheme to maximise deployment where there is local support
  • Providing innovation funding and a clear route to market for long-duration storage
  • Developing a ‘Just Transition Strategy’ to ensure “no one and nowhere is left behind”
  • Updating the Smart Systems and Flexibility Plan once every two years
  • Reviewing research and development funding levels to ensure the renewable sector receives similar support to other key industries

“Speed and scale are key: we must revolutionise the rate at which we build new projects onshore and offshore,” commented McGrail

“Working closely with government and local communities, we need to transform the way we plan and regulate our energy system, to make the UK the best place to invest in by reforming the CfD mechanism. This will help us to develop our supply chains and build up whole new industries in innovative technologies like floating wind technology and green hydrogen, which we can export worldwide.

“If we get this right, we can attract £200 billion in private investment and deliver over 120,000 jobs in wind energy alone over the course of this decade”.

Alongside the report, Renewable UK also announced the appointment of Jane Cooper as its director of offshore wind. She is currently director of regulatory and external affairs at Orsted and will take up the newly created position in September.

Cooper will lead a team delivering the Offshore Wind Sector Deal agreed with the government in 2019, which she was closely involved in developing, as well as the wider Offshore Wind Industry Council programme.

“Delivering the Offshore Wind Sector Deal was a pivotal moment for the industry and I am really excited to be joining Dan and his fantastic team at Renewable UK to continue the work we in the industry started three years ago, as we step up to meet the new government ambition,” said Cooper.