UK govt raises CfD funding to £227 million

To bolster the UK’s renewable generation capacity, the UK Government has today (3 August) unveiled a £22 million increase in funding for the Contracts for Difference (CfD) scheme, which will include solar.

This takes the total budget for the CfD scheme to £227 million for the Allocation Round 5 (AR5) auction, which opened in March 2023. Despite this increase, it is important to note that this figure for AR5 is £58 million below last years’ AR4’s funding, which sat at £285 million.

There is still a substantial distance between the two figures despite many, including Energy UK, highlighting the need to scale up investment for the CfD scheme. Failure to do so could see the UK miss key decarbonisation targets.

The new funding will see:

• An increased budget for established technologies such as solar and offshore wind – from £170 million to £190 million.
• An increase in the budget for emerging technologies such as floating offshore wind – up from £35 million to £37 million.
• Maintaining £10 million ring-fenced budget for tidal stream projects.

“Today’s funding through our flagship Contracts for Difference scheme – the lifeblood of our renewables industry for nearly a decade – will help grow our economy by making Britain the first choice for investors in renewable energy projects and secure skilled jobs for future generations,” said energy security secretary Grant Shapps.

“This will be the case for established technologies like solar, and new innovations like floating offshore wind and, alongside our backing for oil and gas, carbon capture and our revival in nuclear, will ensure we can help power more of Britain from Britain for decades to come.”

The move by the government has been welcomed by those within the energy industry, despite still being lower than 2022’s auction round. Trade association RenewableUK, who had previously been critical when the funding was first announced in March 2023, were amongst those that saw the move as encouraging.

“Today’s announcement by the government of a budget uplift of £22 million for CfD in this summer’s auction to bring forward vital new clean energy projects is welcome, particularly given the industry’s concerns that the budget published initially – which was £80 million lower than last year – would limit the number of viable renewable energy projects able to secure a contract to generate clean power,” said Ana Musat, executive director of policy at RenewableUK.

“At a time when the UK is investing heavily in energy security and looking to create additional economic opportunities by growing the renewables supply chain, it’s essential that we have a consistent pipeline of projects.

“An increased CfD budget can help, but the most important step government could take to encourage investment in this growing sector would be to ensure that we have sustainable pricing in future auctions, which take into account the difficult economic circumstances faced by the sector. Setting artificially low prices will deter investment, reduce our pipeline and limit the UK’s ability to stay ahead in the global race for renewable energy capital, skills and supply chain investment.”