The UK government has overhauled its Contracts for Difference (CfD) scheme, a move that could reshape the country’s renewable energy landscape and accelerate its decarbonisation goals. The reforms, announced recently, extend contract durations for offshore wind, onshore wind, and solar projects from 15 to 20 years, a change designed to provide investors with greater certainty and spread costs more evenly for consumers.
This shift comes as the UK aims to expand its offshore wind capacity from the current 15 gigawatts (GW) to between 43GW and 50GW by 2030, a target outlined in its strategy to decarbonise the electricity sector. However, a government report from November 2024 highlighted the challenges in achieving these ambitious goals, underscoring the need for reforms to facilitate project development.
The extended contract terms are expected to facilitate the development of more clean power projects and support job creation. “These reforms will give developers the certainty they need to build in Britain, helping deliver more clean power projects and supporting thousands of jobs,” said UK Energy Secretary Ed Miliband.
In addition to longer contract lengths, the reforms allow the energy minister to review developer bids before finalising the auction budget. This approach aims to procure capacity more accurately and ensure consumers receive better value for money.
The government also plans to bolster private investments in the UK’s clean energy sector to over £30bn annually by 2035, as outlined in the Clean Energy Industries Sector Plan. This plan involves collaboration between industry, trade unions, and workers from various regions, reflecting the government’s commitment to a clean energy economy.
The reforms could have significant implications for the sector. Longer contract terms may attract more investors, potentially accelerating the development of renewable energy projects. The increased certainty for investors could also lead to more competitive bidding, driving down costs for consumers. However, the success of these reforms will depend on how effectively the government implements them and how the market responds.
The UK’s move to extend CfD contract terms and reform the auction process could set a precedent for other countries looking to accelerate their renewable energy development. As the global energy sector continues to evolve, such reforms may become increasingly important in shaping the future of clean energy.