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| Viridor's waste-to-energy plant in Cardiff, to be completed next year: it will receive a £90 per megawatt hour strike price. |
The figures cover each year from 2014 until 2019. Some technologies will receive the same price for the whole period, while others will see the price reduce, as their costs are expected to fall.
For projects with a potential deployment capacity over 1 GW:
- Offshore wind will receive £155/MWh, falling to £135 in 2019
- Onshore wind will receive £100, dropping to £95 in 2019
- Large solar PV will receive £125, falling to £110 in 2019
- Hydro will receive £95 throughout
- Biomass conversion will receive £105 throughout.
- gasification and pyrolysis (£155-£135)
- anaerobic digestion (£145-£135)
- waste to energy (£90)
- dedicated biomass with CHP (£120)
- geothermal (£125-£120)
- landfill gas (£65)
- sewage gas (£85), and
- marine energy technologies (£305).
These prices are broadly comparable to the support levels available under the Renewables Obligation, with a number of adjustments to account for the benefits of Contracts-for-Difference (CfDs).
Under the Levy Control Framework there will be a cap, starting in 2015/16 at £4.3 billion in real terms, to limit the costs passed on to consumers.
The application process is now open for developers of renewable electricity projects to apply for Investment Contracts ahead of when the long-term EMR contracts (CfDs) are finalised.
DECC also confirmed that the Government will allow renewable electricity to be imported and exported from the UK to elsewhere to help meet renewable energy targets, boost energy security and investment.
Renewable energy projects on the Scottish islands will receive additional support to connect them to the mainland.
Energy Secretary Ed Davey said the strike prices would “make the UK market one of the most attractive for developers of wind, wave, tidal, solar and other renewables technologies. This will help boost home-grown sources of clean secure energy and enable us to decarbonise the power sector."
He predicted that renewables would contribute "more than 30% to our mix by the end of this decade".
The Government also revealed details of the capacity market, which will be launched next year, in which participants will include existing generators and investors in new plant. They will bid at auctions to offer to provide the total amount of electricity that the UK is expected to need for 2018-2019.
Bidders who are successful will receive a steady price from the year in which they agree to make the capacity available. In return they must deliver electricity as required, or face financial penalties.
The announcements coincided with a report from watchdog Ofgem warning that “without action" electricity margins could tighten in 2015-2016 to 2%-5% depending on demand.
Ofgem’s chief executive Andrew Wright said this “highlights the need for reform to encourage investment in generation”.
£75 million of capital for investment in innovative energy projects was also announced, with the aim of lowering the cost of deployment of offshore wind, renewable heat, carbon capture and storage.
Reactions to the strike prices have been mixed.
Gaynor Hartnell, chief executive of the UK’s Renewable Energy Association, said she was struck by what was left out. “The notable omission is dedicated biomass. We will be pushing for clarification of these as soon as possible.”
She observed that there are “hundreds of megawatts of biomass projects looking to commission under the new support regime and their contribution of clean, baseload electricity will help keep the lights on when the capacity crunch comes”.
The Solar Trade Association's Head of External Affairs, Leonie Greene, criticised the contracts for difference model for mitigating against independent renewable energy suppliers because it depends on generators securing a market 'reference' price for their power, which is then topped up by Government to meet the 'strike price'.
She said that there is then a relatively high risk for independent generators of failing to meet this price, meaning that purchasers of renewable power are likely to offer less attractive terms to independent generators in their long-term Power Purchase Agreements for their output.
“Because of the additional risk the CfD model presents to independent generators like solar power, we would expect to see the additional cost of risk factored into the strike price," she said.
Maria McCaffery, CEO of RenewableUK, representing marine and wind energy sectors, was more enthusiastic: "The levels of the strike prices are challenging but possible considering the reduced time periods that renewables will be supported for under the contract for difference system compared to the Renewable Obligation”.
She did call for more details to be set out for the sake of investors’ confidence. "The secret is consistent, long-term support and investors seeing that Government is behind renewables and low carbon generation for the long term.”
Utility firm RWE's CEO Paul Massara also called for more detail. “This, along with the overall complexity of the proposals and the need to gain EU state aid approval, means significant uncertainty remains. Only once the final detail on contract terms and conditions is clear will a full understanding of the impact these proposals will have on potential investment into the UK and on Britain’s energy consumers be possible,” he said.
The CBI's chief policy director, Katja Hall also welcomed the figures but added: “The Energy Bill’s passage has dragged on long enough — the big task now is to get it on the statute book as soon as possible.”
She added: "giving the Green Investment Bank borrowing powers will give it real teeth to support investments in low-carbon technologies”.
The Government also announced plans to support nuclear power and shale gas.
This includes £100,000 for communities situated near each exploratory (hydraulically fracked) well, and 1% of revenues from every production site.
The Treasury will pre-qualify EDF’s Hinkley Point C new nuclear power project for a Government Infrastructure Loan Guarantee, which is available to any large infrastructure project. Negotiations remain ongoing between Government and NNB Genco (a subsidiary of EDF) on the potential terms.
This support was lamented as being bad for Scotland by Lang Banks, director of WWF Scotland, who commented that: "the negative impacts of the UK Government's obsession with supporting nuclear and fossil fuels appear to outweigh the positive moves made on renewables.
“It would be a great shame indeed if Scotland's sensible ambition to create jobs and cut climate emissions through increased use of renewable energy was undermined by these measures," she continued.
"In environmental terms, plans to offer tax breaks and compensation for communities for shale gas extraction, and billions of pounds to underwrite new nuclear power is just plain foolish," she added. "Worse still, every pound wasted on polluting gas or nuclear means a pound less on encouraging energy saving and supporting more clean renewables."
Will Straw, the IPPR’s associate director, warned that shale gas "won’t do anything to keep energy bills down in the short term. We must ramp up our ambition on energy efficiency through innovative funding mechanisms like the UK guarantee scheme and the Green Investment Bank".
Caroline Lucas, Green MP for Brighton and Hove, said in Parliament yesterday that ministers should be "spending more time working out how to keep fossil fuels in the ground and less time squandering taxpayers’ money on tax breaks for shale gas that scientists say we simply cannot afford to burn if the Government are to keep to their commitment to limit global warming to below 2°".
This was a reference to a report from watchdog the Committee on Climate Change published this week which warned that the country risked missing its carbon emission reduction targets.
David Kennedy, Chief Executive of the CCC, cautioned: “There remains a very significant challenge delivering the 3% annual emissions reduction required to meet the third and fourth carbon budgets, particularly as the economy returns to growth.
"Government action is required over the next two years to develop and implement new policies. A failure to do this would raise the costs and risks associated with moving to a low-carbon economy,” he said.
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