The UK Labour government has halted the next round of auctions for solar and wind energy contracts, citing concerns that taxpayers are not receiving sufficient value for money. Energy Minister Michael Shanks announced that the contracts for difference (CfD) system will undergo examination to assess its effectiveness for consumers before the scheduled 2027 round.
The CfD system allows renewable energy generators to bid for a guaranteed rate for the electricity they produce. Critics have pointed to its cost implications, as subsidies are paid from consumer bills when electricity prices fall below the agreed rate, even though generators must repay gains if prices exceed the agreed rate.
This decision aligns with a broader shift away from stringent green policies, as the Labour government, including Prime Minister Andy Burnham and Chancellor John Healey, faces pressure over the cost of living. Shanks stated that while the CfD system has provided investors with certainty for projects with high upfront costs, modifications may be necessary.
James Alexander, CEO of the UK Sustainable Investment and Finance Association, expressed concern that delaying or reviewing the auction process could signal a weakening commitment to the energy transition and potentially put billions in capital investment at risk. He called for urgent clarity on the future of the process.
Chancellor John Healey previously indicated that new clean energy projects could be vetoed if they contribute to additional taxpayer costs. This comes as figures show that reliance on wind power made September the most expensive month on record, with consumers facing a £505 million surcharge. Ministers are reportedly alarmed by the cost of "wasted wind" – energy that must be curtailed when wind farms are built faster than the grid can accommodate.
The National Energy System Operator has projected that the cost of disconnecting wind turbines could reach £9 billion by 2029, potentially adding up to £100 to domestic energy bills. In February, a significant number of new renewable projects, including a record amount of solar power, were awarded contracts. The latest auction secured 4.9 gigawatts of solar power and 1.3 gigawatts of onshore wind. The government noted that these prices were less than half the estimated cost of building and operating new gas power stations.