Learn more about the 2024 CfD auction and what this means for renewable energy buyers looking to secure a cPPA.
Our last CfD article investigated the impact that Contracts for Difference (CfDs) would have on Power Purchase Agreements (PPAs).
The article concluded that, until the CfD auction takes place, renewable energy investors could choose whether a CfD or a PPA would have the best value for their project. We also noted that while projects would still be available in the Corporate Power Purchase Agreement (cPPA) market, CfD auction outcomes might have an impact on where cPPA prices settle.
Fast forward to today, and the CfD auction results are set for publication in early September. Read on to find out what this entails, and what this means for energy buyers looking to secure a cPPA in the coming months.
What is the CfD scheme?
The CfD is a government support scheme, allocated to renewable projects through annual auctions. It was created to encourage the development of new renewable energy generation in the UK.
As part of the CfD scheme, generators receive a fixed price (plus inflation) for every MWh of electricity that is exported to the grid. This provides revenue certainty for projects, allowing investment decisions to be made.
As an example, three of Innova’s projects – Carn Nicholas in Swansea, Stokeford in Dorset, and Manor Farm in Lincolnshire – were awarded CfDs in 2022, following which the projects were funded and constructed to deliver low carbon power at affordable prices.
Successive governments have now reaffirmed their commitment to the scheme as a way of meeting renewable deployment and Net Zero targets.
CfD auctions take place annually each summer. The application process begins in March, with the auction itself taking place between July and September.
Looking ahead to the AR6 result
At the time of writing, developers will have submitted their applications and bids for the 2024 CfD auction, known as Allocation Round 6 (AR6).
The UK government has allocated a £1.5 billion budget (recently increased from £1 billion by the new Labour government) to secure renewable projects on the scheme. This will be split between different renewable technologies, including solar, onshore wind, and offshore wind.
As mentioned above, the results will be published in the first week of September. At that time, developers and investors will find out which of their projects have been awarded a CfD, and the price they have secured.
So, what does this mean for energy buyers?
CfD allocations are held annually, meaning that a window of opportunity will open up for energy buyers to gain access to clean renewable energy projects outside of the CFD process.
The best time to secure these projects under a cPPA is between September and March, when developers will be seeking alternative routes to market for their power, and energy buyers won’t be competing with the CfD.
During the CfD auction window, developers may be holding sites back for the CfD, or buyers may be offered sites which have already entered the auction and could suddenly be made unavailable depending on the outcome of the CFD process.
For energy buyers who are incorporating cPPAs into their company’s low carbon or Net Zero strategy, the close of the CfD auction process is therefore an optimal time to speak to developers and find the right projects to suit their needs.
Looking to learn more?
Our team of experts at Innova are constantly monitoring the energy market landscape and will be keeping a close eye on the CfD as it develops in the next month or so.
We’d be glad to discuss our findings with you in more detail, alongside the cPPA opportunities we currently have available through Innova’s solar portfolio.
Let's talk cPPAs
Author: Dom Griffiths, PPA Sales Business Developer.