Energy minister Michael Shanks has confirmed that the UK Government will pause next year’s renewable energy subsidy auction as ministers prepare major reforms aimed at cutting household and business energy bills.
The decision marks a significant shift in the Government’s approach to supporting new wind and solar developments, amid growing concerns about the cost of renewable energy subsidies and the ability of the electricity grid to accommodate new generation.
It could have profound consequences for Scottish offshore wind, raising fresh questions about future projects in an industry central to Scotland’s energy transition.
Speaking to the House of Lords environment committee, Mr Shanks confirmed that the next round of contracts for difference (CfDs), the Government’s flagship renewable energy support scheme, would be put on hold while ministers consider changes to the system.
“The CfD process has been incredibly useful to give investors certainty to build new projects,” he said.
However, ministers “do now want to pause” before the next auction round to “look at whether we need some more significant changes to the contracts for difference scheme to make sure they work for the consumers of the country”.
The announcement follows growing concerns that renewable energy capacity is being developed faster than the electricity transmission network can be upgraded.
Grid bottlenecks have resulted in increasing amounts of wind power being wasted, with generators receiving hundreds of millions of pounds in payments to switch off turbines when electricity cannot be transported to where it is needed.
The current auction round, known as allocation round eight, is expected to proceed in the coming weeks, although the Treasury has indicated that new contracts will only be awarded where they can demonstrate benefits for consumers.
The reforms follow Chancellor John Healey's Budget last week, in which he declared that the Government's priority was “first and foremost cheaper energy”.
James Alexander, chief executive of the UK Sustainable Investment and Finance Association, warned: “Investors will be deeply concerned by comments from the energy minister today that cast doubt on next year’s renewable energy auction.”
He added: “We now need to see urgent clarity on the future of this process, or the Government could put billions of pounds of capital at risk.”