The Contracts for Difference (CfD) scheme is widely regarded as a great UK energy policy success. The scheme has supported investment while, at the same time, driving down cost and passing the benefits of low-carbon energy back to the consumer.
Recent very low CfD strike prices, set against a big jump in supply chain costs and a much higher cost of capital, may mean that projects are no longer viable. If this is a systemic issue, then it has implications for the UK’s net zero strategy and for its leadership position in offshore wind. By insisting on low prices in the forthcoming Allocation Round 5 auction the UK government is taking a very big gamble.
In our latest insight paper, Johnny Gowdy discusses recent trends in CfD strike prices, the impact of this on future auctions and how rebuilding trust and collaboration between industry and government is essential to mitigate the growing delivery risk we are seeing.
Regen has been working to explore the future market mechanisms required to deliver the renewable investment needed to reach net zero: you can find our other work in this series here. If you’re interested in discussing this paper, as well as future developments to the CfD mechanism, please contact director Johnny Gowdy or project manager Ellie Brundrett.