Customer Logins

Obtain the data you need to make the most informed decisions by accessing our extensive portfolio of information, analytics, and expertise. Sign in to the product or service center of your choice.

Customer Logins

UK auction brightens prospects for up to 3.5 GW of sidelined solar

21 January 2022 Cristina Brooks

The UK has started subsidizing onshore wind and solar photovoltaic (PV) projects again after a six-year pause, a gift to developers stuck in planning limbo.

The country's government closed bidding in an auction for subsidies for 12 GW of renewable energy on 14 January, the largest ever round in terms of funding offered, seeking to fund a wider array of technologies.

Winning developers will receive Contracts for Difference (CFDs) that subsidize renewable and low-carbon projects by guaranteeing income. The winning bids are set to be announced in the third quarter of 2022.

Renewable energy association RenewableUK estimated the round could see £20 billion ($27 billion) of investment in renewables. Developers of more capacity than the amount tendered were likely to seek funds, meaning the auction would spark competitive bids.

The £285 million a year in funding will go not only to proven technologies such as offshore and onshore wind, but also to emerging ones like floating offshore wind, remote island-based wind power, as well as tidal stream facilities that rely on ocean currents to generate power.

Most of the funding, over two-thirds, will be poured into offshore wind, as the UK aims to remain at the top of capacity tables by installing 40 GW of capacity, with planned wind farms recently announced in Scotland.

The latest auction reserves a much smaller, £10-million pot for onshore wind, solar, and hydropower, but it's the first time in six years the first two have seen any type of support. It is expected to subsidize 5 GW of new onshore wind and solar capacity.

IHS Markit noted in its recent report on the auction that there was a pipeline of over 6 GW of unbuilt wind and solar projects in the UK with planning permission, meaning that the projects might apply for subsidies under the round.

Planning data shows 3.2 GW of wind projects and 3.1 GW of PV projects fall into this category, according to the report.

Of the larger (over 10 MW) solar farms, BP joint venture Lightsource BP is the largest single developer with 438 MW of solar farms under development.

The pipeline also includes the biggest solar project of any that is yet built or permitted, the 350-MW Cleve Hill project near Canterbury in southeast England.

Of the 10-MW-capacity and larger onshore wind projects, Scottish utility SSE's Viking Energy wind farm in the Shetland Islands is the largest project proposed, with a planned capacity of 443 MW.

Installers hurt by lack of support

The decision to fund onshore wind and solar comes as an about face after government policies shuttered many installers in the emerging PV industry.

Following the UK's first CFD auctions in 2014, the UK added 3 GW of PV and nearly 1 GW of onshore wind.

The UK halted CFDs for solar and onshore wind farms after a 2015 auction as local opposition to onshore facilities grew, and it changed rules in 2016 to allow local planning authorities more freedom to oppose projects.

Installations of these technologies also slowed after the government closed the UK Renewables Obligation Certificate (ROC) scheme. The scheme required UK electricity suppliers to source some of the power they supply from renewable sources like onshore wind and solar.

This financing gap for the pair of technologies was not filled by power purchase agreements, according to IHS Markit's report on the auction.

After consulting on adding onshore wind and solar to the funding round, the government decided to encourage local development with guidance. However, planning limitations created in 2016 still exist.

In the year that followed, the government also ended its feed-in-tariff scheme funding small-scale wind power and solar, for example domestic rooftop PV.

RenewableUK said at the time this caused "huge uncertainty" for companies in the sector, for example solar panel installers.

But now the UK is seeking to tender for a combined 5 GW for onshore wind and PV, with a ceiling of 3.5 GW for each technology type.

IHS Markit forecasts that onshore wind and solar capacity will grow at 1.4% and 2.6%, respectively, whereas offshore wind is expected to grow at 4.6% per year. "The economics look promising for both onshore wind and solar PV, with government-set strike and reference prices well above levelized costs. However, the auction parameters suggest that only the most competitive projects can receive contracts," wrote IHS Markit Senior Analyst Zoe Grange in the report.

Solar should receive a stronger boost than onshore wind from the £10 million funding pot because of its lower cost. "The larger gap between solar projects' cost and the maximum level at which they are allowed to bid may signal that more contracts will be won by solar projects," said Grange.

The swerve comes as UK seeks to decrease its dependency on fossil fuels, contributing to the UK's energy security, while at the same time meeting its 2050 net-zero target.

Natural-gas-fired power contributed 35.7% of electricity generated, while renewables made up a record 43.1% in 2019, according to government figures.


Follow Us

May 11

RT @SPGlobal: Essential Intelligence from S&P Global helps you dive below the surface. Because a better, more prosperous world is yours for…

{"items" : [ {"name":"share","enabled":true,"desc":"<strong>Share</strong>","mobdesc":"Share","options":[ {"name":"facebook","url":"","enabled":true},{"name":"twitter","url":"","enabled":true},{"name":"linkedin","url":"","enabled":true},{"name":"email","url":"?subject=UK auction brightens prospects for up to 3.5 GW of sidelined solar | IHS Markit &","enabled":true},{"name":"whatsapp","url":"","enabled":true}]}, {"name":"rtt","enabled":true,"mobdesc":"Top"} ]}
Filter Sort