The United Kingdom Department for Business, Energy and Industrial Strategy (BEIS) has issued a draft budget of £60m (€67.4m) for the next Contracts for Difference (CfD) renewable energy allocation round due to start at the beginning of 2019. This third round will focus on less established technologies, such as offshore wind, remote island onshore wind, advanced conversion technologies, anaerobic digestion, biomass with CHP, geothermal, tidal stream and wave energy. The selected projects will be divided in two delivery year terms, the first one for 2023-2024 and the second one for 2024-2025. Besides, it will impose a total capacity cap of 6,000 MW for the delivery years 2023-24 and 2024-25.
The strike prices (in 2012 prices) for offshore wind will be set at £56/MWh (€63/MWh) for 2023-2024 and £53/MWh (€59/MWh) for 2024-2025. The price for wind facilities on remote islands will be set at £82/MWh (€92/MWh) for both delivery years.
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 were 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. In the 2017 auction, clearing price for offshore wind halved compared with the first auction held in 2015. The new prices reached a new record in the UK offshore wind industry at £57.50/MWh and £74.75/MWh.