UK to hold next green energy subsidies auction by end-2016

LONDON (Reuters) - Britain will hold its next auction of renewable energy subsidies by the end of 2016 and a further two over the course of the current government’s term, energy minister Amber Rudd said on Wednesday.

Britain's Energy Secretary Amber Rudd speaks at the annual Conservative Party Conference in Manchester, Britain October 5, 2015. REUTERS/Suzanne Plunkett

However, conditions for gaining the subsidies, previously paid to generators such as RWE Innogy and Scottish Power for their green power output, will be much stricter, Rudd added, as the government looks to rein in the costs of supporting green energy.

“Subsidies should be temporary, not part of a permanent business model,” she said in a policy speech at the Institution of Civil Engineers in London, while also announcing the closure of Britian’s coal-fired power plants by 2025.

Britain has announced a swathe of cuts to renewable subsidies over the past few months, arguing that some technologies such as onshore wind no longer need support.

Offshore wind is one of the more expensive forms of renewable energy, but the government said it will continue to support the technology as long as costs come down. Rudd said Britain could have 10 gigawatts of offshore wind capacity by 2020.

The government is backing offshore wind because it believes the technology could be exported to many other markets around the world.

Offshore wind projects secured guarantees of between 114 pounds ($173) and 120 pounds per megawatt hour (MWh) under an earlier subsidy auction, compared with around 80 pounds/MWh for onshore wind projects.

As part of extensive reforms of Britain’s electricity market, the government has been changing the way it supports renewable energy by replacing direct subsidies with a contracts-for-difference (CfD) system.

Under the scheme, qualifying projects are guaranteed a minimum price at which they can sell electricity and renewable power generators bid for CfD contracts in a round of auctions.

Contracts worth a total of 315 million pounds were awarded during the last auction in February, but Rudd did not give any indication how much would be available during the next rounds.

Additional reporting by Karolin Schaps; Editing by Jason Neely and David Holmes