The Government of the United Kingdom has invested an enormous amount of funds in the green energy field, and announced recently the largest energy solution in the history that includes GBP 200 million in offshore wind power as well as GBP 55 million in emerging renewable energy technology.
The UK government adopts Contract for Difference (CFD) as the mean to support low carbon energy, where renewable energy schemes that conform to the conditions are able to apply for CFD that will facilitate sales of electricity with fixated prices and lower the risks of development. Multiple buyers are now going to sign with Low Carbon Contracts Company (LCCC) operated by the country after deciding on the exercise prices, with the duration of the contract being 15 years.
The price at which power producers sell to power companies fluctuates in the free power market of the UK, and LCCC will be responsible for subsidizing power producers if the exercise price is higher than the market proposed price. This mechanism primarily replaces direct subsidization, and the difference is returned vice versa, which although isn’t necessarily regarded as a form of “subsidization”, can guarantee vendors from sustaining losses due to the fluctuations of market prices.
The UK government pointed out that the latest round of CFD at the end of last year provided GBP 200 million in supporting offshore wind power with no upper limit in capacity. It also allocated GBP 55 million for emerging renewable energy technology such as tidal energy, geothermal energy, wave energy, and floating offshore wind farm, and it aimed to inject GBP 24 million into floating wind power. Anne-Marie Trevelyan, Minister of State for Business, Energy and Clean Growth, pointed out that the new program encourages the development of the next generation renewable energy, and not only provides power for households, but also achieves the global-leading climate targets of the UK.
The Department for Business, Energy & Industrial Strategy (BEIS) commented that the 4th round of CFD aims to double the purchased contracts from the previous round that was concluded at the end of September. The UK government currently promises to convene the auction once every two years, though the 4th round of CFD may conclude during the second or third quarter of 2022.
(Cover photo source: shutterstock)