The British Department for Business, Energy and Industrial Strategy (BEIS) has published the final statutory notices required to launch the upcoming third Contract for Difference (CfD) renewable allocation round, which is set to take place in late May 2019. This will be the third allocation round under the CfD scheme (Allocation Round 3 or AR3) and it will be opened to Pot 2 technologies (less established technologies) such as offshore wind, remote island onshore wind (> 5 MW), advanced conversion technologies, anaerobic digestion (> 5 MW), biomass with CHP, geothermal, tidal stream and wave energy. Besides, the BEIS has increased the auction budget to £65m in 2011-2012 prices, which is 8% more than the draft budget notice unveiled in November 2018. This budget is expected to prop up the delivery of around 4 GW of new renewable generation capacity capped at a maximum of 6 GW.
The CfD mechanism was set up for the development of renewable energy generation projects. Contracts are awarded under the framework of competitive auctions, with the lowest price bids being successful. Qualified bidders are allowed to apply for 15-year support of their projects, which means they will receive a guaranteed remuneration for the electricity they generate. The produced electricity is then sold on the wholesale market. If the achieved price is below the remuneration awarded in the CfD auction, the difference is reimbursed to the company. Clearing price for offshore wind halved compared between the first auction held in 2015 and the October 2017 auction, when prices reached a record low in the UK offshore wind industry at £57.50/MWh (€64.10/MWh) and £74.75/MWh (€86/MWh).
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