Eight projects have been awarded investment contracts under what is called the "FID-enabling" or "early-CfD" scheme, an interim arrangement to allow developers to make final investment decisions prior to full establishment of the new "contracts for difference" renewables support regime that is in the process of being introduced in the UK (replacing the existing RO (renewables obligation) mechanism).
The eight projects chosen are:
- Offshore wind: Beatrice (SSE/Repsol), 664 MWe; Burbo Bank (Dong), 258 MWe; Dudgeon (Statoil/Stakraft), 402 MWe; Hornsea 1 (Dong), 1200 MWe; Walney Extension (Dong), 660 MWe.
- Biomass conversion of coal plants: Drax unit 1 (Drax Power), 645 MWe; Lynemouth (RWE, purchased from Alcan in 2012), 420 MWe.
- Dedicated biomass with CHP: Teesside Renewable Energy (MGT Power), 299 MW.
Under the 15-year contracts, designed to give investors in low carbon technologies the confidence they need to pay the up-front costs of major new infrastructure projects, generators are entitled to receive a guaranteed price under a contracts for difference scheme based on the following "strike prices": 155 £/MWh for offshore wind in 2014/15, declining to 140 £/MWh as from 2018/19; 105 £/MWh for biomass; and 125 £/MWh for dedicated biomass with CHP. This compares with a current UK wholesale power price of about 43-45 £/MWh and the strike price agreed under a similar scheme for the Hinkley Pt C nuclear units, 92.5 £/MWh for 35 years (falling to 89.50 £/MWh if Sizewell C is built).
A noticeable absentee from the above list is biomass conversion of unit 3 at Drax (unit 2 at the site having already been converted, under the existing ROC scheme). In December 2013 Drax was advised that the conversions of both units 1 and 3 were eligible for FID-enabling/early-CfD investment contracts. It has now been told the unit 1 conversion project does not qualify but is eligible for support under the old RO scheme. Drax has initiated legal proceedings against the government.
In contrast, Ecotricity has withdrawn its application for an investment contract for Heckington Fen (54 MWe onshore wind) under FID-enabling/early-CfD and instead will seek support under the RO scheme. Ecotricity founder Dale Vince said "We have extensive experience developing windfarms under the renewables obligation ... [while] contracts for difference comes with new risks and uncertainties which it is very difficult to quantify."
Introduction of the new CfD based renewables support mechanisms in the UK are subject to EU State Aid clearance.
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