United Kingdom – As part of the Contracts for Difference (CfD) program, the UK government has launched a consultation to gather input from industry on how to improve supply chains in the low-carbon electricity generation sector.
CfD is the government’s primary method of promoting renewable energy, lowering the cost of technologies and encouraging private investment by providing projects with a steady income. In order to give CfD applications a more thorough review, some of the consultation proposals include tougher questioning and scoring of questionnaire responses, as well as the addition of an interview and a higher pass mark.
Generators will be required to take a variety of actions to improve supply chain competitiveness, which will lower the cost of energy generation.
Other emerging renewable energy technologies such as floating offshore wind are proposed as part of the Supply Chain Plan process, which would ensure that Supply Chain Plans are included for technologies that are expected to see significant growth and widespread deployment in the next CfD round.
Low-carbon economy
Suppliers of projects with a capacity of 300MW or more must submit Supply Chain Plans in their CfD application before they can compete in the CfD auction, which is the government’s primary tool for ensuring that CfDs will grow the low-carbon economy. As part of the CfD questionnaire, applicants select the Supply Chain Plan commitments they wish to make. These are then tested for quality and ambition before an application is approved, while ensuring that the United Kingdom fully complies with its international obligations set out by WTO and EU-UK trade agreement by the World Trade Organization.
The CfD’s fourth allocation round, the results of which will be announced in the spring/early summer, strengthened the supply chain plan assessment process. Further changes will help ensure that the fifth allocation round, when it opens in 2023, delivers increased benefits. There will be a consultation on whether or not sites should be excluded from future applications if the generators fail to meet their commitments under the Supply Chain Plan, and the Business and Energy Secretary Kwasi Kwarteng can terminate contracts as a last resort if this happens.
Between the first allocation round in 2015 and the third allocation round in 2019, the price per MWh of offshore wind fell by around 65 percent, demonstrating the efficiency of CfD’s market-based design. The government is also launching a Call for Evidence as part of today’s consultation to gather input on the potential for future allocation rounds to see additional changes to Supply Chain Plans.
