Scottish government calls for auction system review after CfD AR3 results

On 20 September, BEIS announced the results of the Contracts for Difference (CfD) Allocation Round 3 (AR3). The auction results cleared at record low prices with 2023-24 delivery year prices at £39.65/MWh and 2024-25 prices at £41.61/MWh. The results drew criticism from the Scottish government despite projects in remote islands winning contracts for the first time (see our blog on 23 September).

Two advanced conversion technology projects, six offshore wind projects and four remote island wind projects with a combined capacity of 5.77GW were awarded contracts.

Six of the 12 projects, which are located off the coast of Scotland, are shown in the table below.

Despite the relative success of Scottish projects, there were several notable projects that failed to win contracts. Pertinent to Scotland, the 90-turbine Moray West Offshore Wind Farm (sister project to the Moray East wind project) was unsuccessful in its CfD auction proposal, as was Red Rock Power’s Inch Cape Wind Farm off the Angus coast. Several other remote island wind projects are also failed in their bids, such as the Viking Wind Farm joint venture between the Shetland community and SSE.

It is these failures, along with exclusion of other technologies that the Scottish government would like to deploy at scale, that provoked a call from Scotland’s Energy Minister Paul Wheelhouse for the UK government to urgently review the limitations of the auction system, and how it is impacting Scotland’s own infrastructure development targets.

He acknowledged that, while some of Scotland’s island projects have done well, “serious questions remain as to whether these will be enough to secure our key objective of transmission links to these islands in the near future.” Developing Scotland’s network infrastructure was listed as a priority in Scotland’s Electricity and Gas Networks: Vision to 2030, which was published in March.

Wheelhouse also believes that “floating wind, wave and tidal developers must be given the same opportunity to deploy devices at scale and drive down costs.”

We expect calls from the Scottish government for further energy market reform to intensify as decarbonisation and energy system targets between Scotland and the rest of the UK diverge. As we go to press, the Scottish government has announced landmark legislation that will commit Scotland to becoming a net zero society by 2045 – five years before the rest of the UK.

To keep up to date on policy and industry developments in the Scottish energy sector, follow the daily news feed on Scottish Energy News or sign up to our weekly newsletter. For more information, please contact Neil Mearns at n.mearns@cornwall-insight.com.

UK government           Scottish government

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