Renewable energy scheme reformed to boost supply chains

The government has launched a consultation over reforms to the renewable energy scheme – Contracts for Difference – to enhance supply chains.

The consultation is being conducted to attain views from industry on how to make supply chains across the low-carbon electricity generation sector more competitive, efficient, and productive, as part of the Contracts for Difference (CfD) scheme.

CfD is the government’s main means of facilitating renewable energy, pushing down the cost of technologies and supporting private investment by offering projects with stable income.

The proposals

As well as this, the consultation proposals entail comprehensive inquiry and scoring of questionnaire responses, as well as establishing an interview – enabling for greater scrutiny of CfD applications – and raising the pass mark to make qualification more robust.

The prospective adjustments will guarantee generators execute various behaviours to improve upon the competitiveness of supply chains, thus decreasing the cost of energy generation.

Energy Minister Greg Hands said: “The Contracts for Difference scheme has helped the UK become a world leader in renewable energy, drive down costs and reduce our exposure to volatile global fossil fuel prices.”

Supply Chain Plans

The consultation includes a proposal to extend the Supply Chain Plan process to encompass developing renewable energy technologies, such as floating offshore wind, to guarantee Supply Chain Plans are incorporated for technologies anticipated to go through substantial growth and mass deployment in the next CfD round.

The government’s primary method of ensuring CfDs can grow the low-carbon economy are Supply Chain Plans, which are proposed by developers of projects that have a capacity of 300MW or more in their CfD application and evaluated in a questionnaire before they can participate in the CfD auction.

Within the CfD questionnaire, applicants select the Supply Chain Plan commitments desire; these are then tested for their quality and ambition ahead of an application being passed, while making sure the UK fully abides by its international responsibilities set out by the World Trade Organisation and in the EU-UK trade agreement.

Having already intensified the supply chain plan assessment process in the CfD’s fourth allocation round – the conclusions of which are expected to be revealed in the spring or early summer – further changes will help make certain the fifth round provides improved benefits when it opens in 2023.

The Business and Energy Secretary, Kwasi Kwarteng, is able to terminate a contract as a last resort if generators do not realise the Supply Chain Plan pledges they have made, with the consultation also inviting views on excluding sites from future application either for not signing the contract offered or for termination of the contract before or for failing to meet the delivery milestone.

The efficiency of the CfD scheme’s market-based design has been exhibited in cost reductions seen between the first allocation round in 2015 and the third in 2019, when the price per unit (MWh) of offshore wind fell by around 65%.

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