Largest-ever CfD auction round announced

[dan_b]

This seems to have escaped notice, but the UK Government has just opened up the latest CfD renewables contract auction (round 4) which seeks to secure 12GW of new renewable generation capacity - ie more than rounds 1-3 combined - and will be open to onshore wind and solar, as well as offshore wind, floating offshore wind and also tidal.

https://www.offshorewind.biz/2021/12/13 ... nce-round/

[AE-NMidlands]

A waste of a lot of money if we can't store any...
I suppose it will displace a bit of gas in normal conditions though.
A

[dan_b]

Objective- zero carbon electricity grid

First target- drive coal off the grid completely
Second target- drive wood pellet burning off the grid completely
Third target - reduce gas to a marginal generator
Fourth target - drive gas off the grid completely

The first 3 will be delivered by massively increased RE Generation (and nuclear) capacity and HVDC interconnectors.
Getting from 3 to 4 will require huge amounts of storage and also significant dispatchable flexible overcapacity, and is the really, really expensive bit.

[Mart]

A waste of a lot of money if we can't store any...
I suppose it will displace a bit of gas in normal conditions though.
A

RE, largely via the CfD mechanism, has been displacing ~3.5% of FF generation pa for a decade now, growing from around 5% to 40%, whilst coal + gas has fallen from around 75% to 40%, so a bit of gas, yes.

Intraday storage is starting to grow, but until there is an economically viable amount of excess RE, both in scale and regularity, we won't see, nor need large scale long term storage. That's why all the studies and reports on high RE penetration first focus on overcapcity of RE as the cheapest option, before moving to long term, large scale storage. This mirrors the dilemma that say an off-grid household might have, trying to decide whether to invest in bigger batteries, or increased RE generation to meet the toughest days/weeks, accepting that higher levels of generation may mean waste/spill/excess in the best periods.

[Mart]

Dan, just to say I've been getting excited about the CfD round 4 for months now, and with Wifey's help, managed to track down where AZPS appears to work. Sent him an e-mail about a month ago, apologising for the 'stalking' and letting him know about this site, as I thought his input on the CfD round would be really useful. His support and explanations for the 2017 and 2019 rounds informed me greatly. I haven't heard anything, which is a shame, but fingers crossed.

He would hopefully be able to suggest possible strike prices for onshore wind and PV, now that they've been allowed back in, and also help to explain how the mechanism for offshore wind will work, since that one is subsidy pot limited, not capacity limited, so if the strike price is close enough to the anticipated market price, there is technically no limit on the capacity that could successfully 'win' a contract.

[Mart]

I don't know if anyone will find this interesting, and I hope it's not too pedantic, but the original article contains this statement:

The competitive nature of the CfD scheme has been hugely successful in driving the deployment of renewable energy across Great Britain whilst rapidly reducing costs, the government said. The scheme’s design has led to the price per unit of offshore wind to fall by around 65 per cent between the first allocation round (AR) in 2015 and the third in 2019.

which is great news, but I thought it worth pointing out that the reduction in terms of subsidy is even greater when you take into account the wholesale market price for leccy, which has to be paid regardless.

So looking at the highest and lowest CfD's for offshore wind, we have £176/MWh, and £46/MWh. If we then assume an average market price of ~£40/MWh, then the CfD subsidy top up drops from £136/MWh to £6/MWh, or a reduction of over 95%.

Now, to be fair, when wind generation is low, the leccy price will be high(er), and when wind generation is high, the leccy price will be low(er), so the average weighted price that wind sells into will probably be lower than the annual average price, thus pushing the subsidy top-up .... up, but regardless the reduction is staggering.

Also of note, is how the CfD mechanism does help to stabilise the cost of leccy to us, partly, since when prices are higher, less subsidy is paid out, and can even be negative, with repayments to the subsidy pot exceeding outgoings. So given the high price of leccy at the moment, it's fun to look at the 2021 CfD expenditure, which has been falling, and so far for Q4 is, shall I say 'different'?

Historical Dashboard - CFD expenditure

[AE-NMidlands]

I am still concerned that nothing is happening about storage. Neither of the big permitted HEP scemes is progressing, which I am sure is down to grid charges in both directions. Digging around, I found this in a document from OfGem:

The CMP308 workgroup is aiming to implement the second BSUoS Task Force proposal to remove BSUoS from generation. On receipt of the Final Modification Report from that industry workgroup, we will evaluate the refined proposal on a holistic basis, taking into account our understanding of the potential impact on consumers, as well as different categories of market participants. This will likely form an important part of our assessment of the modification against (i) the relevant Code Objectives; and (ii) our Principal Objective of protecting the interests of existing and future energy consumers and our wider statutory duties.9
The second BSUoS Task Force recommended implementation of this reform two years
following our response to their final report. Our open letter in December 2020 noted that “based on the information available at this time, our view is that April 2023 would be an appropriate target for this element of the reform.” This view still stands. However, for the avoidance of doubt, nothing in this letter, or the attached independent report, fetters our discretion in respect of the CMP308 proposal when it comes to us for decision.

which I am afraid is kicking the can down the road, as I saw something somewhere about a second stage of consultation.
A

[Mart]

Just to say / ask, is anyone else getting excited as the announcement of the CfD round 4 results get closer?

Hopefully we'll hear something in the next two(ish) weeks.

I'm hoping that off-shore wind will be in the region of £40/MWh again (2012 baseline), which today, index linked, is about £50/MWh. Also hoping for on-shore wind and PV to be around £40/MWh, now that they've been allowed back in.

Should be some large GW's rolling out.

My biggest wish though, would be for an annual auction, rather than biennial, but we can't have everything ..... we're would we put it?

[Ken]

i presume we are limited at installation capacity, there is a good bit of specialised stuff eg ships with big enough cranes.

[dan_b]

Mart you should be excited this morning

Results of latest CfD auctions are out with nearly 11GW of renewables that will generate electricity at prices 4x lower than current cost of gas

2.2GW solar £(2012) 46/MWh
0.9GW onshore wind £42
7.0GW offshore wind £37 (!)
0.6GW island wind £56

All of this new capacity is slated to be online by 2027.

Although can't believe they're still quoting 2012 equivalent energy prices /MWh!