Solar farm developer, Green Hedge Renewables (formerly AEE Renewables) believes that the new contracts for difference (CfD) mechanism plays to the company’s “competitive strengths” and has welcomed the opportunities the scheme is bringing to the sector.
Despite supporting only five solar projects in its first allocation round, Green Hedge believes that the CfD could be positive for solar. The developer says that the scheme helps reduce the risk for investors and ensures that end consumers are receiving the cheapest renewable energy possible thanks to the competitive auction process.
Green Hedge’s joint managing director, Tess Sundelin explained: “The recent announcement of the CfD auction result has underlined how solar farms have become the cheapest low-carbon technology in the UK, significantly cheaper than offshore wind turbines but also cheaper than new nuclear plants and competitive with onshore wind. As a non-mechanical technology with significant scope for further improvement we expect solar to make more rapid efficiency gains than other renewable technologies over the coming years. If combined with a policy framework that provides both investment certainty and cost effective decarbonisation, solar farms will become the first renewable technology in this country that is commercially viable without subsidies. As repeated DECC surveys have shown, with over 80% approval, it is also the UK’s most popular electricity generation technology with the general public.”
However, the developer also acknowledges that CfDs increase all-in development costs for solar farms as well as increased project timelines. Green Hedge’s joint managing director, Niels Kroninger explained: “Development of projects under the CfD system does become significantly riskier and more cash intensive. While this may lead certain developers to exit the large-scale solar market, we believe that the CfD system plays to Green Hedge’s competitive strengths as a well-funded developer with strong internal investment and risk management processes.”
The developer suggests that the government should prioritise cost effectiveness by placing all eligible technologies in competition with each other for funding, as opposed to the current division of technology by its perceived maturity. Green Hedge argues that this approach would result in more clean electricity for the same amount of budget.
Green Hedge also confirmed that it would be looking at developing ≤5MW projects in 2015 which will remain supported by the renewable obligation for the foreseeable future.