RWE's UK country chair, Tom Glover, has urged the British government to reassess its approach to calculating Contracts for Difference (CfD) budgets. With the impending AR6 auction on the horizon, Glover highlighted concerns regarding the current methodology, stressing the need for a substantial and immediate overhaul.
Glover asserted that the existing framework significantly overestimates the cost per megawatt of renewables, consequently undermining the efficacy of the CfD in securing necessary levels of procurement. He pointed out discrepancies in the forecasted market prices used for CfD auctions, which diverge markedly from prevailing market sentiments. Moreover, Glover highlighted disparities in estimated load factors for offshore wind, emphasizing the need for more realistic assessments.
The core issue, as Glover outlined, lies in the inflated ‘top-up' requirements for CfD payments, stemming from overly conservative assumptions. This, he contended, results in a quicker depletion of auction budgets, ultimately translating to fewer megawatts procured.
Advocating for a shift towards market-aligned projections for future power prices and evidenced load factors, Glover emphasized the potential for substantial cost savings in CfD procurement. Such adjustments, he argued, would empower the government to effectively address the shortcomings of AR5 while facilitating a successful AR6 at a reduced fiscal burden.
Glover called for a swift recalibration of the government's approach, advocating for a more market-responsive strategy geared towards maximizing value. He underscored the importance of aligning future power price assumptions with independent market forecasts and leveraging historical data for load factors, thereby ensuring the CfD's ability to meet ambitious renewable energy targets while enhancing energy independence and promoting broader economic benefits for UK consumers.
In conclusion, RWE's appeal signifies a pivotal call for reform in the renewable energy funding landscape, urging policymakers to adopt a pragmatic and market-oriented approach to CfD budget calculations.
