There is currently much speculation in the UK energy sector that offshore wind will blow away the competition for Contracts for Difference (CfD) from the current 2nd auction (which will offer £290m of annual support). Many expect the strike prices to be pretty low with figures of less than £75/MWh being thrown around for the larger offshore wind projects.
What does this mean for the UK Energy from Waste market?
There was much optimism after the 1st CfD auction results in February 2015 with five UK Energy from Waste (EfW) facilities securing CfDs:
- Two of these were for EfW (with CHP) - Gent Fairhead in Essex and K3CHP in Kent and both had strike prices of £80/MWh; and
- Three of these were for Advanced Conversion Technologies (ACT) plants - BH EnergyGap in the Midlands, Energy Works in Hull and Enviroparks in Wales with the strike prices ranging from £114/MWh to £119/MWh.
In the current 2nd CfD auction, the relevant "fuelled technologies" are limited to:
- large >5MW Anaerobic Digestion (AD); and
- Dedicated Biomass with CHP.
There is no Energy from Waste (with CHP) - and so no CfD opportunity here.
BEIS confirmed in early August that the qualifying applicants exceeded the budget and therefore the sealed bid auction process will be in play. The deadline for CfD strike price bids was on Friday 18 August.
Many commentators expect aggressive CfD strike price bidding for the major consented offshore wind projects following the trend seen in European offshore wind tenders. How low these could be is difficult to predict, but figures of less than £75/MWh have been expressed by some in the market.
As BEIS have not set any minimum level of CfD support for the fuelled technologies - this means that ACT's, AD and Dedicated Biomass plants may miss out on CfDs altogether if the offshore wind market strike prices are lower than those submitted by the fuelled technology sector.
BEIS have confirmed that the results of this 2nd CfD auction will be known on Monday 11 September (just in time for the RWM conference in Birmingham):
- Fingers crossed that some ACT, AD or Biomass project developers have got their CfD strike pricing strategy right.
- Either way, if there is a future CfD allocation round, BEIS should set a minimum level of CFDs so that the emerging EfW technology sector (which has had a pretty challenging year) has the future support it needs.