The EU has approved the Contracts for Difference (CfD) scheme under its state aid guidelines.
Commission vice president in charge of competition policy, Joaquín Almunia, called the scheme “a fine example of how to promote the decarbonisation of the economy with market-based support mechanisms, at the lowest possible cost for consumers”.
The commission also approved support for five offshore wind farms that received support ahead of the policy's full launch saying that the selection process had been an “open, transparent, competitive and non-discriminatory auction”.
From 1 April 2015, solar projects over 5MW will only be permitted support under the CfDs.
The National Audit Office raised fears that DECC may have overpaid on the eight early CfD awards, including the five offshore wind projects. The eight represent 58% of the CfD budget up until tax year 2020/21.
Despite the EU’s enthusiasm for the policy, industry groups remain concerned, particularly over the policy’s budget allocation for solar and the additional administrative burden it will place on smaller firms.
“The sheer complexity of the new policy mechanism disadvantages SMEs who are entering a game of three dimensional chess against multi-national utilities. DECC needs to do more, and quickly, to level the playing field for SMEs,” said Leonie Greene, head of external affairs at the Solar Trade Association.
“In particular, DECC should not restrict renewable obligation support for solar power – it is unfair that the solar industry is being uniquely exposed to the untried and unclear CfD mechanism without the benefit of a transition period from existing, trusted policies,” said Greene, in reference to the government's hasty decision to scrap the RO support mechanism for large-scale solar.
“The solar industry was on an impressive track to zero subsidy, but the government needs to provide a level playing field and stable policy if this is to be achieved,” she added.