UK Energy Minister Kwasi Kwarteng seems to have embraced the renewables future. The Contracts for Difference (CfD) for Low Carbon Electricity Generation for Allocation Round 4 (AR4) announced today provides support for up to 12GW of new renewable energy. This is a reasonably ambitious target and one that we consider to be achievable.
Draft Supply Chain Plan guidance for 300MW plus projects was also published. This guidance is now part of a further consultation on Changes to Supply Chain Plans and the Contracts for Difference (CfD) contract.
We now know that supply chain plains will need to show their impact on UK productivity, competitiveness, and local jobs. The associated areas mentioned of business environment, ideas, infrastructure, people and place are aligned with the wording of the Offshore Wind Sector Deal. The consultation invites views on the clarity of the new Draft Supply Chain Plan guidance.
Of particular note is the suggestion that new legislative powers may be required to assess Supply Chain Implementation Reports, with the potential consequence of CfD contract termination. This would give the teeth to supply chain planning that many have observed has been missing. Industry and Government will need to continue to work together to find a balance that works, and the forthcoming consultation will be crucial in that regard.
The draft Supply Chain Plan guidance that has been issued starts to flesh out the thinking around how local content might be increased, although industry will need to wait before we see the new Supply Chain Plan application questionnaire.
It is a positive step to have it confirmed that there will be three pots for renewables projects in Allocation Round 4.
Pot 3 for fixed offshore wind gives solid support for progress towards the goal of 40GW of offshore wind by 2030.
The inclusion of floating wind in Pot 2, along with marine renewables and remote island wind, is also key for hitting 40GW. Many years ago, I did an analysis that suggested 40GW of offshore wind in the UK would need between 8GW and 16GW of floating. Starting the journey to that scale is important.
Setting the floating depth limit to 45m or greater, and not the 60m originally suggested, is also very pragmatic and is aligned with industry requests. Developers are already developing sites that include depths around 45m so there may be potential for floating in those. Also, it makes sense to enable floating to be nearer shore.
Crucially Pot 1 includes onshore wind and solar. After half a decade outside the CfD mechanism, those established technologies can now show the price reductions that they have achieved.
Whether this really is a new, green industrial revolution remains to be seen, but today’s announcements will serve to maintain a positive impetus across the renewable electricity sector, and that is to be welcomed.