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UK Solar, Wind to Compete Head-to-Head With Solar Under Auction Plans

The U.K. plans to force onshore wind developers to compete head-to-head for the first time with solar generators when they bid for green power subsidies as the nation seeks to reduce the cost of renewable energy for consumers.

Joint auctions for the most mature kinds of renewables such as energy from waste, hydropower, and landfill gas and sewage gas would start in the autumn, according to a consultation paper posted on the Department of Energy and Climate Change's website.

"The government clearly hopes that there will be a sufficient number of projects to create competitive tension so that bids come in materially below the administrative strike prices," Peter Atherton, an analyst at Liberum Capital Ltd., wrote today in a note to investors.

The U.K. is seeking 110 billion pounds ($180 billion) of power-industry investment through 2020 while trying to keep a lid on consumers' bills. More competitive auctions would spur developers to bid for the government's guaranteed rates at below the so-called strike prices offered for different technologies.

"Current indications, based on our understanding of the pipeline for renewable energy projects, are that there will be a high level of demand for government support schemes," the department said in the paper published on its website late yesterday. "We are better placed than we had previously anticipated to introduce competitive forms of allocation."

The U.K. is grouping less-established technologies -- offshore wind, wave, tidal, anaerobic digestion and dedicated biomass plants -- into a separate group that won't have to bid competitively for capacity. It is still considering how to deal with plants converted to biomass from coal and remote projects in the Scottish islands.

The consultation is open for four weeks, and the government will release its response toward the end of February, it said. A further consultation will be held in March on planned floors and ceilings on rates for specific technologies, it said.

The less mature technologies won't be required to compete with onshore wind and solar power "before they are ready to do so," the government said. It proposed setting aside a minimum level of 100 megawatts of capacity for wave and tidal power.

Copyright 2013 Bloomberg

Lead image: U.K. flag overlaid over wind generators and solar panels, via Shutterstock

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Copyright 2014 Bloomberg

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