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Opening up Contracts for Difference 'could save £2bn'

Opening up Contracts for Difference 'could save £2bn'

22nd February 2016

A new Drax-commissioned report claims the whole system cost for offshore wind - including paying for back up generation via the capacity auction - is £127/MWh.

By comparison, onshore wind costs £92-97/MWh, solar costs £96/MWh and biomass conversion costs £84/MWh. None of these established technologies will be able to take part in the next auction, although they may be included in future ones.

The research suggests allowing them to bid in all three of the auctions expected to take place before 2020 and reforming the auction to reflect whole system costs, could lead to savings of £1.9b to £2.2bn over the entirety of the 15-year contracts.

The report examines two possible ways of reflecting the whole system costs of technologies in Contracts for Difference auctions: either allowing projects to bid for both Contracts for Difference and capacity market contracts at the same time or enabling the auction administrator to prioritise projects with the lowest whole system costs.