Contracts for Difference (CfD) Sustainability Requirements

A Renewable Energy Association Contracts for Difference Seminar highlighted several interesting facts. 

Second round allocation successful applicants are dominated by offshore wind farms to the tune of 96% of the total capacity (3,346 MW). Advanced Conversion Technology (ACT) applications made up 2% with the remaining 2% from dedicated biomass CHP.

The proposed Grangemouth Renewable Energy Plant, a dedicated solid wood CHP that was planned to power 148,880 by 2021/2022 representing 1.92% of total planned capacity has terminated its CfD application (https://www.lowcarboncontracts.uk/cfds/grangemouth-renewable-energy-plant). Consequently, second round successful applications for dedicated CHP are practically negligible.

In terms of sustainability requirements, CfDs are in line with the Renewables Obligation Order 2015 (as amended) which includes land and the greenhouse gas criteria. However, the greenhouse gas criteria does not include a permanently fixed threshold to be met.  BEIS has proposed in the 2017 consultation the lowering of the greenhouse gas threshold for CHP generating stations with Contracts for Difference. The results of the consultation may not be new news that the government plans to adopt a lower threshold of 29gCO2e/MWh for new CHP developments. However, with the marginal returns for CHP with Contracts for Difference compared to windfarms, lower carbon equivalent emissions for solid wood CHP generating stations and the complexity of building a large scale CHP generating station translates to an extremely unattractive proposition to developers.  Essentially too much risk and not enough returns.

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