Government claims 1GW of solar will be £243 million cheaper under CfDs

Government claims that 1GW of solar under the new Contracts for Difference (CfD) mechanism will be £243 million cheaper than under the previous Renewable Obligation (RO) scheme.

Responding to a request from Labour MP Alan Whitehead to compare the costs of 1GW of solar financed under the RO to the equivalent under the CfD, Michael Fallon, minister of state, department for business, innovation and skills, published the following table:

Note: Estimates based on new capacity commissioning in financial year 2016-17. Values are in £2012 real prices and discounted to the first year of generation (2016-17), using the government’s 3.5% discount rate

The figures make the case for the government’s current proposals to remove all RO support for solar over 5MW from April 2015, a move that the Department of Energy and Climate Change says is necessary in order to preserve the budget in the levy control framework (LCF).

Speaking to Solar Power Portal, Leonie Greene, head of external affairs at the Solar Trade Association, expressed concern that the government might not be making fair or up-to-date comparisons.

Greene suggested that an alternative comparison which adjusted the RO in line with current cost evidence would have been more apt –  “unfortunately DECC have a habit of using out-of-date data for solar”. Greene also said that the CfD model could actually lead to an increase in subsidy levels if renewables depress electricity prices, although this would not affect household affordability.

Greg Barker, the minister for climate change, reiterated to the solar industry at Solar Media’s Making CfDs Work for Large-Scale Solar event, that the move to auction-based CfDs was necessary. He stated: “We must spend wisely. The subsidy budget for renewables is generous but finite. Subsidy which, after all, comes directly from the energy bills of hard-pressed consumers.”

However, the expedited switch to auction-based CfDs has left the solar industry with little time to get to grips with the new framework. To compound the issue, a number of critical areas of the framework are still under consultation such as the budget available for CfD-funded projects and the how often the allocation rounds will be held.

Barker told delegates at Making CfDs Work for Large-Scale Solar that the solar industry should “manage your expectations about the size of support” available under the new mechanism.