Energy security boost with multi-million backing for renewables

• £22 million boost for government’s flagship renewables scheme, making available contracts for renewable power generation potentially worth billions of pounds in total over the scheme’s lifetime
• funding for established technologies such as solar and offshore wind, some of the cheapest domestic energy sources available, will ensure Britain remains a global leader in renewable energy
• the Contracts for Difference (CfD) scheme plays a key role in boosting the UK’s energy security, growing our economy and powering more of Britain from Britain

A multi-million-pound boost for cleaner, more secure energy will make Britain the ‘first choice’ for investors, Grant Shapps said today.

The Energy Security Secretary today announced a £22 million increase in government backing for renewables through the flagship Contracts for Difference scheme – taking the total budget to £227 million for this auction.

The scheme – launched in 2014 – is the government’s main system for supporting low-carbon electricity generation and has already led to an increase in the proportion of the UK’s energy coming from renewables.

In 2022, renewables fuelled around 42% of the UK’s electricity generation – up from 7% in 2010 - compared to around 21% in the US and 23% in Japan.

In the first quarter of 2023, renewables generated a record 48% of our electricity, all making strong progress towards our targets to deliver a decarbonised power sector by 2035 and net zero by 2050.

The increased funding combined with the introduction of annual auctions this year, will boost investments in Britain’s world-leading renewable industry, while strengthening the UK’s energy security, fostering growth in the country’s green industries and reducing exposure to volatile global gas prices.

Energy Security Secretary Grant Shapps said:

Putin’s barbaric action against Ukraine made clear our need to do whatever it takes to bolster our energy security.

Today’s funding through our flagship Contracts for Difference scheme – the lifeblood of our renewables industry for nearly a decade – will help grow our economy by making Britain the first choice for investors in renewable energy projects and secure skilled jobs for future generations.

This will be the case for established technologies like solar, and new innovations like floating offshore wind and, alongside our backing for oil and gas, carbon capture and our revival in nuclear, will ensure we can help power more of Britain from Britain for decades to come.

Today’s new funding for the current round (AR5) will mean:

• an increased budget for established technologies such as solar and offshore wind – from £170 million to £190 million
• an increase in the budget for emerging technologies such as floating offshore wind – up from £35 million to £37 million
• maintaining £10 million ring-fenced budget for tidal stream projects

This funding boost is expected to send a powerful signal to the industry, increasing developer confidence in the sector every year and enhancing the UK’s reputation as among the most attractive places to invest and grow the economy, with nearly 25,000 jobs directly supported by renewable electricity sectors in 2021.

Today’s increase comes as Deputy Prime Minister Oliver Dowden visits Able Seaton Port to announce the installation of the first of over 2 hundred 260m tall wind turbines is installed at Dogger Bank - becoming the world’s largest offshore windfarm. A specialised floating platform, taller than the Eiffel Tower, has been created to install the wind turbines onto the seabed.

When complete, the 277 turbines, which include British steel manufactured in Wales and processed in Corby and Hartlepool, will be capable of powering the equivalent of up to 6 million homes annually. Dogger Bank is being built in 3 phases – Dogger Bank A, B and C – by renewables developers SSE Renewables, Equinor and Vargronn.

This comes as the register revealing the most serious risks to the United Kingdom, the National Risk Register, is published today as part of government plans to better prepare the public and businesses for the threats facing the country, including to energy security.

Deputy Prime Minister Oliver Dowden said:

Today we’ve published the latest National Risk Register, showing the many challenges we face to keep Britain safe in an uncertain world - like the risk of disruption to global energy supplies.

Backing British renewables will tackle that risk and undermine Putin’s energy ransom. Which is why I’m with SSE in Hartlepool today as we install the first wind turbine at the new Dogger Bank offshore wind farm, generating cheap, clean energy to power millions of British homes.

This latest financial backing will help to replace expensive imported fossil fuels with cheaper, cleaner, domestic sources of energy. Building a more secure energy future with thriving green industries will have the knock-on effect of helping to grow the UK’s economy and create jobs across the country, with billions of pounds in private investment.

The Contracts for Difference scheme has already helped accelerate plans to diversify, decarbonise and domesticate the UK’s energy supplies, with the last round (AR4) securing around 11GW of low carbon capacity – enough to generate sufficient electricity to power 12 million British homes through nearly 100 clean technology projects.

The scheme supports the deployment of renewable power right across Britain, with the scheme so far having awarded contracts to 52 projects in Scotland, which represents around 30% of all CfD projects. In Wales, the scheme has so far awarded contracts to 9 projects, totalling around 260MW of capacity.

Minister of State for Energy Security and Net Zero Graham Stuart said:

Our successful, world-leading scheme has accelerated the roll-out of renewable, homegrown energy.

Today’s increase will improve energy security and maximise the potential of the scheme. This will result in investment, a stronger renewables sector and growth to our economy.

Neil McDermott, CEO of the Low Carbon Contracts Company (LCCC), said:

The £22 million boost to the Contracts for Difference (CfD) Allocation Round 5 reaffirms the government’s commitment towards transforming Britain into a global leader in renewable energy. Contracts for Difference plays a crucial role in enhancing energy security, driving economic prosperity and propelling us towards a more sustainable future.  LCCC currently manages a portfolio of 98 CfDs, and is excited to deliver AR5, furthering our vision to accelerate the delivery of net zero.

Claire Dykta, Head of Markets for the National Grid Electricity System Operator, said:

Following our evaluation of qualifying projects we welcome the Secretary of State’s decision to revise the budget for Allocation Round 5.

Notes to editors

The budget estimates for this round of Contracts for Difference are presented in 2011-2012 prices in line with the Control for Low Carbon Levies. These figures are an estimate of the maximum amount of annual support, within the first 4-5 years following deployment.

Actual payments will vary depending on future wholesale electricity prices, and outcomes of the competitive auction process. This includes the volume of successful capacity, the range of technologies supported, as well as the ‘strike price’ paid per MWh generated, as set through the auction. This means in some scenarios the total sum of support payments could be in the billions. As set out in Powering Up Britain, levy funded support for renewables, including through the Contracts for Difference scheme, has totalled around £80 billion since 2010.