The United Kingdom Minister of State for Energy & Clean Growth has committed to organising new series of Contracts for Difference (CfD) auctions starting from May 2019 and every two years from then on. The planned competitive tenders will be held under the previously announced £557m (€624m) budget, which will cover both remote islands and offshore wind projects. Each round is expected to deliver between 1 and 2 GW of offshore wind each year in the 2020s depending on the achieved price. This announcement fits into the framework of the UK Clean Growth Strategy and the government hopes that this move will drive down energy costs for consumers.
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. In the last August 2017 auction round, 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.
The second CfD auction was implemented in 2017 and saw the 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.