Support for future UK renewables confirmed, but Scottish onshore wind could miss out

The application process for the second CfD allocation round will open in April 2017, and will be open to competitive bids from "less established" technologies: offshore wind; advanced conversion technologies (ACT); large anaerobic digestion (AD) projects; dedicated biomass with combined heat and power (CHP); and wave, tidal stream and geothermal projects. These projects should be ready to begin generating electricity from 2021/22 or 2022/23.

Details of the second allocation round were published as the UK government confirmed its intention to phase out unabated coal generation by 2025 by way of imposing gradual emission limits on coal stations. The government is also consulting on whether onshore wind generation on remote islands should be entitled to bid for CfDs as part of this allocation round, or should be supported in other ways, despite calls for more immediate certainty from the Scottish renewables industry.

"The UK government has made a clear decision to focus on the so-called 'less established' technologies such as offshore wind, advanced combustion technology and anaerobic digestion," said energy law expert Ian McCarlie of Pinsent Masons, the law firm behind Out-Law.com.

"While it's no surprise that onshore wind and solar PV have not been allocated CfD support in today's announcement, the lack of clear support for island renewables will no doubt prompt concern in some quarters. Yet again, the industry is presented with a consultation document which casts more doubt on the viability of island renewables, and therefore creates more uncertainty for remote and fragile local economies," he said.

The UK government has allocated £730m to the CfD scheme over the period between 2021 and 2026. CfDs replace the previous direct subsidy regime for renewable electricity generation, and provide guaranteed payments to operators of approved renewable generation technology. Payments are calculated with reference to a technology-dependent 'strike price' and a market reference price, which enables the system operator to claw back money when market prices are high. The contracts usually provide support over a 15-year period.

The draft 'strike prices' for the second allocation round are considerably lower than those that were set during the last auction, and the government intends that the competitive auction process will bring these down still further. For example, the maximum price for offshore wind projects is £105/MWh in 2012 prices for projects ready to begin generating in 2021/22; 25% lower than was set for the last auction.

The government's intention is that the projects awarded with CfDs as part of this allocation round will be able to deliver enough renewable electricity to power around one million homes and reduce carbon emissions by around 2.5 million tonnes per year from 2021/22 onwards, according to its draft budget.

Amber Rudd, then energy secretary, announced the government's intention to take unabated coal out of the UK's energy generation mix in November last year. The consultation, which closes on 1 February 2017, sets out two potential methods of doing so, based on making changes to the Emissions Power Standard. This sets a limit on coal power's annual carbon emissions based on their generating capacity.

Existing coal power generation would potentially be able to stay open by retro-fitting carbon capture and storage (CCS) technology, according to the consultation. However, the government said that it was unlikely that any power station operators would choose to do so, based on the age of the affected plants and the cost of the technology.

The consultation on whether "non-mainland" onshore wind generation projects should be treated differently to those on the mainland for the purposes of the subsidy regime closes on 21 January 2017.