The UK government continues to improve the investment climate for renewable energy projects, by revamping its Contracts-for-Difference (CfD) auction scheme, scrapping plans to split its electricity market into zones, and committing to support the uptake of corporate Power Purchase Agreements (PPAs).
The newly approved CfD rule changes are likely to make the scheme more attractive for investors compared to signing PPAs for both new and repowered projects.
Nevertheless, successful CfD auctions are likely to lead to more route-to-market deals in the long run. In addition, potentially high competition in the upcoming AR7 and AR8 auctions could still push many projects to seek PPA offtakers as expected revenues especially for onshore wind in England have improved. Overall, both CfDs and PPAs will be crucial towards reaching UK’s ambitious 2030 targets.
An increase in renewable generation could spell bearish pressure for the Renewable Energy Guarantees of Origin (REGOs) forward curve.
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