Solar to be excluded from next CfD round, uncertainty remains over future allocations

Solar will be excluded from the next Contract for Difference allocation round, which energy secretary Amber Rudd this morning confirmed is to take place in 2016.

A Department of Energy and Climate Change spokesman confirmed to Solar Power Portal this afternoon that this particular CfD round has now been allocated to so-called 'pot two' technologies – less established technologies in need of greater subsidy support – where it is widely expected that offshore wind projects will take a majority of available funding.

Rudd commented during this morning’s strategy speech that DECC was to support the growth of offshore wind, but only if it continues cost reductions. Rudd said that it could support up to 10GW of new offshore wind projects in the 2020s if these cost reductions are realised and, as a result, funding will be made available for three auctions rounds.

However it also remains unclear whether one of these two remaining rounds scheduled to take place during this parliamentary term will be allocated to 'pot one' technologies, including solar and onshore wind.

The spokesman said it was likely that one of the two rounds would be allocated to pot one, but a decision has yet to be made. It has also yet to be decided when the second and third rounds will be held.

The confirmation serves as the first clarification on details relating to CfDs since the department suspended the mechanism indefinitely earlier this year amidst a purported overspend within the Levy Control Framework (LCF).

But solar’s exclusion closes the only remaining route to market for utility-scale projects without the aid of subsidy with Renewables Obligation now closed. Five projects were successful in the maiden allocation round in February, however two have since collapsed after being deemed uneconomical at strike prices of £50/MWh.

While the CfD process was established to increase competition in the UK’s energy market it has been criticised for its complicated nature and profligate early awards. Its precursor, the Final Investment Decision Enabling for Renewables scheme, gave contracts for eight projects which have subsequently taken more than half of the money allocated under the LCF budget.

Finlay Colville, head of intelligence at Solar Intelligence, meanwhile said that it would have been more of a surprise if solar had been included and claimed most developers had by now written off their chances of gaining CfD support.

"The more interesting thing will be what happens to the solar sites that had been getting lined up in a queue by UK solar developers, primed to submit to a CfD auction in 2016. The application costs for a 30-40MW site are not loose change, and the worse nightmare for some developers was always going to be sitting on what now could become stranded approved site assets, ready to change hands at a bargain for those capable of scooping up approved sites and acting on them without CfDs," he said.