UK Energy Ministry BEIS has confirmed it will pull the plug on supports for renewable energy developments that fail to live up to commitments made in their supply chain plans at future CfD auction rounds.
The move is a sweeping reform to a long-standing process that requires every developer chasing subsidy support for a project of 300MW or above to provide BEIS with plans outlining how developers will build the projects.
The changes are being sought to incentivise more local content, especially from offshore wind where the government is chasing a sector deal target of 60% local content by 2030.
BEIS said it will introduce a new ‘operational condition precedent’ allowing the government to terminate CfDs for projects which fail to follow through with promises made in plans.
As part of the changes, the review of each developer’s delivery of its plans will now be brought forward to the milestone delivery date, which is 18 months after contract award.
Projects were previously assessed for supply chain compliance at commissioning.
At this stage developers will need to provide ‘supply chain implementation statements’ which must be certified before power payments can commence.
Vattenfall UK country manager Danielle Lane said the earlier assessment date is “a positive step” that will help manage the threat CfD removal poses to multi-billion-pound projects.
“The changes make it more likely that investment decisions can be taken to keep projects on track to deliver significant amounts of renewables capacity by the mid-2020s,” she said.
Lane however warned the threat of removing CfD backing from failing projects may lead to adverse effects.
“The prospect of losing a Contract for Difference at MDD stage is still a significant investment risk however, and as such it is vital that a clear and transparent supply chain assessment process is put in place,” she said.
“Our priority is to deliver the best-value projects for bill payers, as well as supporting the growth of the UK supply chain.”
BEIS said the changes are being implemented following consultation with developers, renewables associations and trade unions.
The ministry is currently evaluating responses from a separate consultation over the introduction of a so-called ‘supply chain plan questionnaire’ for developers and will outline more detail on this shortly.
RenewableUK deputy chief executive Melanie Onn said: “The latest supply chain proposals set challenging new demands for project developers, so it’s vital that the guidance is clear on how we can demonstrate the contribution we’re making by creating thousands of jobs, developing skills and fostering innovation across the supply chain, as well as building vital new infrastructure.
“Project developers are already working with manufacturers to help them understand our projects’ needs and timelines, which will support investment in new facilities and the development of new skills in our workforce.
“Underpinning all this, we need large volumes of new capacity in the next CfD auction for new contracts to generate clean power to keep us on track for our 2030 target, quadrupling what we’ve already installed.”