Yesterday morning, DECC published the outcome of the first EMR Contracts for Difference (CFD) auction.

In total, over 2GW of new capacity will be supported in this allocation round and the introduction of competition has, on the face of it, reduced the cost of promoting renewable electricity projects – the vast majority of winning CFD bids did not achieve the administrative strike price (ASP).

Critics, however, may point to the results as evidence that smaller players have been muscled out of the market – only one project sub 10MW was awarded a CFD, while Iberdrola and Vattenfall’s 714MW East Anglia 1 and Mainstream’s 448MW Neart na Gaoithe both made the cut (to add to the roughly 4 ½ GW of early stage investment CFD’s which were awarded to the large industry players last year).

In addition, the costs of each CFD will, in reality, be dictated by prevailing wholesale electricity prices – the lower they go, the greater the top up to the clearing prices secured.

All eyes for unsuccessful applicants will be on the next allocation round this Autumn – key milestone dates are (i) the views of a newly elected government on EMR expenditure (ii) the release of the Draft Budget Notice in July 2015 and (iii) the Budget Notice in September 2015.

Talking Points

  • 27 projects received a CFD
  • 2 Offshore Wind (1.1GW), 15 Onshore Wind (748MW), 5 Solar PV (71.55 MW), 2 Energy from Waste with CHP (94.75 MW) and 3 Advanced Conversion Technology (62 MW)
  • Very few projects were allocated CFD’s in 2015-16 and 2016-17 – while there was a big ramp up for projects to be delivered in 2017-18 and 2018-19 respectively
  • The winner in terms of clearing prices was Energy from Waste (with CHP), where 2 projects achieved the ASP of £80/MWh
  • Loser was Solar PV -  2 projects to be delivered in 2015-16 achieved a clearing strike price of £50/MWh, 58% lower than their ASP of £120/MWh. The remaining 3 Solar PV projects achieved a clearing price of £79.23/MWh
  • Clearing prices for the remaining technologies were all below their respective ASP – Onshore Wind at 17% below, Offshore Wind at 18% below and Advance Conversion Technology at 18% below.