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UK government confirms how support for renewable energy projects will be awarded under new scheme

Out-Law News | 05 Sep 2014 | 12:48 pm | 1 min. read

Developers of renewable energy projects will have their first opportunity to apply for a share of government support under the new electricity market reform (EMR) package between 14 and 27 October, the Department of Energy and Climate Change (DECC) has confirmed.

It has published the final framework governing how it will allocate contracts for difference (CfDs), a new form of subsidy which will replace existing schemes including the Renewables Obligation (RO) which will be phased out by 2017.

The document confirms that CfDs will be allocated through a competitive auction process in the event that the amount of support applied for exceeds the amount of funding set aside by the government through its Levy Control Framework (LCF), which limits the amount that can be added to consumer energy bills to pay for the scheme. The government will confirm the scheme's budget on 29 September, but a draft budget published in July indicated that 'established' technologies would be bidding for a share of £50 million while 'less established' technologies would be bidding for a share of £155m.

The indicative start date for projects that are allocated support under the scheme is 23 December 2014 if there are no appeals, according to the document. If there are appeals, the indicative start date is 23 January 2015. The non-qualification review request date is 18 November 2014 and the appeals deadline date is 9 December 2014, DECC said.

CfDs will provide guaranteed payments to operators of approved renewable generation technology, while enabling the system operator to 'claw back' money when market prices are high. Payments will be calculated with reference to a technology-dependent 'strike price' and a market reference price, and places within the scheme will be allocated to technologies that bid for the lowest strike price below the maximum.

The government has previously confirmed that certain onshore wind, solar photovoltaic (PV), energy from waste with combined heat and power (CHP), hydro, landfill gas and sewage gas will be included within the 'established' technology group at the start of the scheme. Projects using 'less established' technologies will not be expected to compete with these on price, but will be grouped together so that any remaining budget may be allocated to another technology if one does not deploy at the expected level.

The framework includes details of the auction process that will take effect if more projects apply for subsidies than can be supported by the budget. If this happens, applicants will be asked to submit sealed bids containing the lowest guaranteed price they would accept per megawatt hour (MWh) of electricity generated. If two or more sealed bids include the same strike price and the budget cannot accommodate them both, one of the projects may selected "using an electronic random assignment process", according to the document.