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CfD round three scheduled for 2019

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The UK's Energy Minister, Richard Harrington, confirmed today (11 October 2017) that up to £557m will be made available for renewable electricity projects as part of the UK government’s Contracts for Difference (CfD) scheme.

Three offshore wind farms were successful in the UK government's latest CfD auction (round two), the results of which were published on the 11th September 2017. The auction saw the cost of offshore wind energy in the UK drop by nearly 50% compared to the previous round. Prices fell below the cost of 35-year contracts for new nuclear power of £92.50/MWh and that of the levelised cost of gas, according to figures from BEIS.

The successful projects included DONG Energy's Hornsea Project Two, EDP Renováveis (EDPR) and Engie's Moray Offshore Windfarm (East) as well as Innogy and Statkraft’s Triton Knoll project.

Both Hornsea Project Two and Moray East are to be delivered in 2022/23 with a strike price of £57.5/MWh (€63.31/MWh), whilst Triton Knoll is expected 2021/22 with a strike price of £74.75/MWh (€82.31/MWh). Prices are guaranteed for 15 years of an expected project lifetime of 25 years.

In round one, East Anglia One and Neart na Gaoithe were successful with strike prices of £111.89/MWh and £114.39/MWh respectively. The auction concluded 26th February 2016.

The next Contracts for Difference auction (round three) is planned for spring 2019 however the government did not disclose how much of the £557m will be available in this round or whether it plans to hold multiple rounds.

According to the government, since 1990 the UK’s emissions are down by more than a third while the economy has grown by two-thirds. Low carbon generation provided more than half (52%) of the UK's electricity this summer, according to National Grid, while PwC analysis shows the UK decarbonising faster than any other G20 nation.

With today's announcement, the government stated that its Clean Growth Strategy, which will be published this week, will build on this success and ensure Britain remains a global leader in the move towards a low carbon economy.

Energy Minister Richard Harrington said: "The government’s Clean Growth Strategy will set out how the whole of the UK can benefit from the global move to a low carbon economy.

"We’ve shown beyond doubt that renewable energy projects are an effective way to cut our emissions, while creating thousands of good jobs and attracting billions of pounds worth of investment."

The Clean Growth Strategy is said to look across the whole of the economy and the country. It includes ambitious proposals on housing, business, transport and the environment, as well as the power sector. It will also show how actions taken to tackle emissions have helped to reduce energy bills for households.

Further information

A Contract for Difference (CfD) is a private law contract between a low carbon electricity generator and the Low Carbon Contracts Company (LCCC), a government-owned company. A generator party to a CfD is paid the difference between the ‘strike price’ – a price for electricity reflecting the cost of investing in a particular low carbon technology – and the ‘reference price’– a measure of the average market price for electricity in the GB market.

The government led scheme is aimed to provide greater certainty and stability of revenues to electricity generators by reducing their exposure to volatile wholesale prices, whilst protecting consumers from paying for higher support costs when electricity prices are high.

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