Contracts for Difference will replace the Renewables Obligation as the chief support mechanism for large scale solar, which will have to bid alongside other technologies for funding.
The government has announced increased budgets with an extra £15m allocated to support ‘established’ technologies, including solar PV, whilst an added £80m will be given to ‘less established’ technologies such as offshore wind and tidal.
According to the STA, this structure will favour large players in the energy industry who can shoulder larger risks, rather than generally smaller SMEs that operate in the solar sector.
“This is not a policy mechanism that has been designed to deliver the stable market growth that solar power needs to bring down costs,” said Paul Barwell, STA chief executive.
“We have repeatedly said to DECC they need to adapt these policies or they will remove rather than increase competition in the energy sector. Smaller solar companies are set to be hit very hard by the design of CfDs because unlike other technologies large-scale solar alone will not have the security of the RO.”
The REA agreed that the CfD processes outlined today will disadvantage SMEs in the renewables sector, and favour vertically integrated utilities that are better equipped to launch successful auction bids.
REA chief executive, Dr Nina Skorupska, said: “Firstly, the allocation process is still too risky and complicated for most of the renewable energy independents and SMEs that are trying to break into the UK’s consolidated energy market, further entrenching the dominance of vertically integrated utilities.
“Secondly, in both the short term and the long term, ministers have failed to deliver value for money. In the short term, the cheaper, more established technologies have been given less than a quarter of the available budget in the first round, with the rest going to the less established technologies.”