DESNZ has published the Allocation Framework for the upcoming AR7 auction which is due to open in August. There are a few significant points of note, which are outlined below.
Administrative Strike Prices Announced
The Administrative Strike Prices (ASPs) are the maximum prices allowed for each technology. Offshore wind has increased by around 10% for both fixed bottom and floating projects. Onshore wind has seen a much smaller increase of 3%, whereas solar has decreased by 11%. Percentage changes calculated by converting AR7 ASPs into 2012 prices.
The decrease in ASP for solar is likely due to reduced module costs, and potentially the economies of scale resulting from the development of larger projects. However it is a significant reduction, and this may affect the number of projects that participate in the auction. Despite this, £75 /MWh adjusted with inflation remains an attractive price. Especially with the new 20 year term of the CfD, and further aided by the fact that route to market PPA discounts to IMRP have also having come down significantly.
Offshore wind’s significant increase in ASP is attributed by DESNZ to the decrease in its assumed load factor.
Significant Decrease in Wind Load Factors
The assumed load factors for onshore, offshore and floating offshore wind have decreased significantly. This means that more capacity can be awarded within the same ‘budget’. It’s also a logical update, the previously assumed load factor of 60% for offshore and 48.7% for onshore were far above real world experience. Reducing these to a more representative 43.6% and 36% for AR7 will avoid artificially restricting the capacity awarded.
New Pot for Floating Offshore Wind
Floating offshore wind now has its own dedicated pot, separate from fixed-bottom offshore wind. This means the two are no longer competing for budget, and allows DESNZ more flexibility when effectively deciding what receives a CfD, alongside the new approach for AR7 of not having pre-defined budgets.
Maxima for Scottish Offshore Wind
On a similar note, Scottish fixed-bottom offshore wind now has a maximum limit (‘maxima’). This enables it to receive a different clearing price, reflecting the higher transmission costs (TNUoS).
Looking to Extract Further Value from the CfD?
Renewable Exchange welcomes these ongoing adaptations to the CfD scheme, which are crucial for meeting Net Zero goals and ensuring energy security in Great Britain
If you have a project that has secured a CfD or are planning to bid in a future auction, reach out to discuss how we can extract additional value through optimising the route to market and merchant nose PPAs please contact us today, we would be happy to talk you through your options.
