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2020

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The pipeline for CfD AR4: Who, where, when?

James Brabben
James Brabben

With the potential reinstatement of ‘Pot 1’ technologies in the next Contracts for Difference (CfD) Allocation Round 4 (AR4) in 2021, this Chart of the Week takes a look at the pipeline of renewables projects most likely to enter the auction.

Drawing upon research in our new service The Renewables Pipeline Tracker, we show a heat map of site locations by capacity for potential AR4 bidders. This is calculated through:

  • Filtering our calculated total pipeline of over 37GW across 800+ sites into those “most likely” to bid
  • These “most likely” are categorised as all CfD eligible technologies which have applied for or gained planning permission, or re-applied for and gained permission, post all subsidy scheme changes and closures. Effectively, this is from early 2019 onwards
  • In our view, these projects are most likely to be competitive in the auction, as prior to the recent BEIS announcements they would have been aiming to operate subsidy-free anyway
  • A separate calculation is made for offshore wind, with all sites likely to be able to build by the delivery years of the next round, likely 2024 to 2026, included
  • From this, we use our database and wider data sources to place sites by their location against regions, specifically in relation to network connections
  • The differing scales of projects means there will be a mix of transmission and distribution connections, but our map groups these to align to the 14 distribution regions in order to visually display all of the data on one map
  • Concentrations in each zone, therefore, represent both larger transmission and smaller distribution connected sites, including offshore wind

The results are revealing, both from a commercial perspective and in the interactions of this with wider policy and network charging arrangements. The calculation reveals just over 13.0GW of our pipeline is eligible under this methodology, split between over 5.5GW of ‘Pot 1’ technologies including onshore wind and solar PV, 6GW of offshore wind and a smaller proportion of ~1GW for ‘Pot 2’ technologies, the majority of which is made up of Remote Island Wind (RIW).

The onshore wind capacity totals 4.2GW, a high figure considering the ~13GW in operation currently. Of this, over 3.8GW is in Scotland, highlighting the continued concentration of sites here owing to continued support in the planning regime, load factor conditions and land use arrangements.

Scotland is also home to all of the RIW pipeline, which totals 900MW and is dominated by the potential 450MW Viking wind farm development on the Shetland Isles. Compared to AR3, RIW projects could be in a more competitive position, with offshore wind potentially carved out of ‘Pot 2’ into a separate exclusive ‘Pot 3’.

Offshore wind has some higher concentrations of projects elsewhere, notably off the east coast of

Heat map of potential CfD AR4 pipeline (transmission and distribution) displayed by DNO region

England, but still sees the majority of capacity in Scottish Waters. Upcoming leasing rounds by ScotWind and the Crown Estate, could also yield additions to this pipeline. Although these will likely be too late for AR4.

For solar PV, the story is very different with the majority of the 900MW pipeline in England and Wales. The data also skews towards the South East region, with the 350MW Cleve Hill Solar Farm, which has been earmarked as a subsidy free development but has the potential eligibility to bid into AR4, hence its inclusion here. However, the project is considered a Nationally Significant Infrastructure Project due to its scale and is awaiting a decision from the Secretary of State in the coming weeks on whether permission will be granted. Our solar PV data for the tracker is taken from planning data sources and therefore does not show the high levels of solar PV without planning status but in the grid connection queue, which has been calculated at over 7GW.

Overall, our analysis shows just how competitive an AR4 auction could be, especially between ‘Pot 1’ technologies. However, the location of potential applications may not be seen in the spread of successful CfD awards. This is due to wider factors such as high TNUoS costs for larger sites in Scotland, differences in load factors and site conditions and wider financing and strategic factors at play from project sponsors. The pipeline may also change as we head through to 2021, with some sites continuing to look at subsidy-free and merchant options instead, whilst new sites may also join the queue for the CfD.

We will be detailing our latest research and our new Pipeline Tracker Service in a webinar, hosted at 11:00am on 22 April. You can sign up to the webinar here.

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