Off shore wind announcements

[nowty]

Surely this is the gov pretending to do something ie funding when in fact it is nothing of the kind.

Most of the overun in the LCCO accounts will be from early high CfD contracts and perhaps ROCS which were the real moneyspinner.

I believe the LCCO only funds CfD contracts, the ROC comes from OFGEM (like FITs), but again its paid from levies on leccy bills.

[Mart]

Surely this is the gov pretending to do something ie funding when in fact it is nothing of the kind.

Most of the overun in the LCCO accounts will be from early high CfD contracts and perhaps ROCS which were the real moneyspinner.

Typically, the CfD contracts are at or above the average wholesale price. Though the last off-shore wind contracts at £37/MWh were very low. But what has happened since the Ukraine invasion and leccy price spike, is that the CfD pot has actually been up some quarters with payments in exceeding payments out. But that's not normal.

When the CfD contracts are issued they have to look at the winning bids to see how their prices compare to the baseline 'cost' that the scheme uses. They can then work out how much subsidy will (on average) be paid, and from that taking the scheme length into account (typically 15yrs for RE), they can divide the budget by the amount of top off, to decide on how much capacity to issue.

Using 2012 prices - Not sure I'll explain this right, but let's say they have a £30/MWh cost baseline and the bids come in for £35, £40, £45, £50 and £55.

They then work out that the size of the schemes covered by the £35 to £50 bids, would exhaust the subsidy pot, based on a £20/MWh top up. That's because all winners get the highest succesful price. So average cost £30, winning bids £50, so the top up is £20.

In this example, they award contracts to the bidders (all at £50) who submitted the £35 to £50 bids.

The baseline figure they use actually goes down each year, which particularly impacts off-shore wind, as it will be arriving later. They figures they use (in 2012 baseline) range from £48.48 in 2026/27 all the way down to £30.19 for 2030/31.

Obviously, it's not as simple as that, as they also have to take capacity into account in the calcs, so really it's the point at which the sum of the capacity of the schemes based on the highest succesful bid reaches the subsidy pot. That pot is specific to the CfD round, which in this case for R6 has been increased.

I can't find it now, but the Low carbon site does have a page which shows how much CfD monies are paid out each quarter, and that's where you can find some quarters (since the Ukraine invasion) where payments back in have exceeded payments out due to the higher prices the leccy has been sold at.

[Mart]

Found the datasheet for CfD payments, and we can see that the schemes were net positive in 2021 Q4, 2022 Q1 and 2022 Q3, when wholesale prices were (I believe) at their highest.

CfD Historical Data