AR5 will be the second CfD funding round that solar can take part in since 2015. Image Pixabay.

The UK Government has announced a £205 million budget for the fifth Contracts for Difference (CfD) funding round, which is the first auction to run annually and the second in which solar can participate since 2015.

A CfD is a private law contract that allows renewable generators to bid for a guaranteed revenue scheme for the duration of the contract. Upon reaching an agreement, the counterparty (which in the UK is the Government) pays the difference between the agreed fixed strike price and a generator’s revenue.

The investment security granted by CfDs greatly encourages renewable investors.

In February 2022, it was agreed that CfD auctions would be held annually to accelerate renewable electricity production, which was welcomed by the solar industry.

So far, CfDs have supported projects totalling almost 27GW of renewable capacity (25% of which is in Scotland), with the most recent round (AR4) securing nearly 11GW of low-carbon capacity2.2GW of which was solar.

The scheme is also supporting the renewable transition outside of England, with 52 projects in Scotland already awarded CfDs (representing 30% of all CfD projects) and nine projects in Wales, totalling roughly 260MW of capacity.

“Our flagship Contracts for Difference scheme is already delivering clean, homegrown energy as well as growing a green economy with green jobs,” said minister of state for energy security and net zero, Graham Stuart.

“Today’s budget announcement, the move to annual auctions and continued investment in renewable energy will limit the impact of events like Putin’s illegal war in Ukraine and drive our overriding priority for the UK to have amongst the cheapest wholesale electricity prices in Europe.

“I am excited to see the opportunities that will open for Britain’s world-class renewable industries as annual auctions kick off this year, enhancing the UK’s reputation as among the most attractive places to invest in for a secure, affordable and prosperous future.”

The funding confirmation follows this week’s Spring Budget announcement which confirmed a £20 billion investment into carbon capture.

A version of this article first appeared on SPP's sister site, Current±.