(Alliance News) - SSE PLC, RWE AG and SIMEC Atlantis Energy Ltd on Friday celebrated their latest contract wins to provide renewables for the UK under the contracts for difference scheme, as the government faced criticism for failing to secure any offshore wind bids.
The UK's Contracts for Difference, or CfD, scheme is a form of private legal contract between a low-carbon electricity generator and the government-owned Low Carbon Contracts Co.
CfDs are designed to incentivise investment in renewables by protecting developers of projects with high upfront costs and long lifetimes from volatility in wholesale prices. Developers are paid a flat rate for electricity produced over 15 years.
The contracts also shield UK consumers from paying higher support costs when electricity prices are high.
Renewables companies can apply for CfD in a 'sealed bid' in an auction, or allocation round.
In the fifth allocation round, the government failed to secure any CfDs for offshore wind. This follows months of warnings from wind farm builders that the government's price caps were not taking into account the spike in costs.
It has been roundly criticised as a major blow to the UK's green electricity ambitions, with a promise to deliver 50 gigawatts of offshore wind by 2030, compared to the 14GW today.
Experts also warn this could lead to higher energy bills for British households.
In a press release, the government said that the scheme was "set to deliver 3.7GW of homegrown energy". It did not mention that last year's auction granted contracts for 11GW.
"While offshore and floating offshore wind do not feature in this year's allocation, this is in line with similar results in countries including Germany and Spain, as a result of the global rise in inflation and the impact on supply chains which presented challenges for projects participating in this round," the Department for Energy Security & Net Zero said.
The latest round had budget funding of GBP227 million and has secured enough to power the equivalent of two million homes, it added.
Meanwhile, Perth, Scotland-based SSE said its renewables division successfully secured CfDs for a total of 605 megawatts of onshore wind.
Its Aberarder wind farm, Bhlaraidh wind farm extension, Strathy South wind farm won CfDs for 100% of total capacity, while Viking Energy wind farm secured a CfD for the remaining 50% of total capacity.
"The CfD scheme has been a hugely successful mechanism for deploying renewable energy, but going forward, changes to the framework for offshore wind are required to ensure the UK can enhance its energy security whilst keeping costs low," SSE Renewables Managing Director Stephen Wheeler advised.
Germany's RWE said it was awarded over 450 MW in CfDs, after successful bids for three onshore, four solar and two solar co-located with battery storage renewable energy projects. The Essen, Germany-based company is the UK's leading power generator, supplying around 15% of its electricity.
RWE reiterated its ambition to invest up to GBP15 billion in new UK clean energy infrastructure by 2030. It expects the first projects to get underway later this year, with full construction to follow next year.
RWE UK Country Chair Tom Glover said RWE was "very concerned" by the lack of offshore wind CfDs in this year's auction, and "very disappointing" that the government had taken no action to address the rising costs.
"We now believe that the UK's ambitions for a five-fold offshore wind growth by 2030 and a net zero power system by 2035 are unlikely to be met without decisive government action," he predicted.
AIM-listed SIMEC Atlantis Energy said it secured four CfDs in the round for its MeyGen tidal stream project in Scotland, totalling around 22MW. In the fourth auction last year, it had secured CfDs for 28MW for MeyGen.
"The success in this round will help the project achieve greater economies of scale and address the significant cost increases faced by those successful in 2022," the Edinburgh-based company said.
Shares in SSE were down 0.4% at 1,611.50 pence each in London on Friday morning, while SIMEC shares jumped 14% to 1.17p. Over in Frankfurt, RWE shares fell 0.3% to EUR37.07.
By Elizabeth Winter, Alliance News senior markets reporter
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