Energy and Climate Change Secretary Ed Davey has announced today that from October this year, renewable energy projects will compete for a budget of over £200 million, as part of the government's reforms to the electricity market.
The funding comes as the first allocation round for the new CfD (Contracts for Difference) scheme, which provides long-term certainty and reduced risk for investors. The reforms to the market will reduce emissions from the power sector much more than through existing policies – around 6% lower on the average domestic electricity bill.
Mr Davey said that renewable energy projects would have to bid competitively for the contracts, ensuring that new, clean electricity generation would be built at the lowest possible cost to energy consumers.
Mr Davey said:
"Our plan is powering growth and jobs as we build clean, secure electricity infrastructure for the future. By radically reforming the electricity markets, we're making sure that decarbonising the power sector will come at the lowest possible cost to consumers.
"Average annual investment in renewables has doubled since 2010 - with a record breaking £8billion worth in 2013.
"These projects will create green jobs and green growth, reduce our reliance on foreign-controlled volatile energy markets and make sure billpayers get the best possible deal.
"We're building a secure, low-carbon electricity system that will be the powerhouse of the British economy, supporting up to 250,000 jobs by 2020."
The funding is managed by the Levy Control Framework, which caps the cost to consumers of renewable energy policies.
The new system has been designed to generate more competition and encourage private sector investment in low-carbon electricity generation. The budget estimate comes after the European Commission confirmed that the CfD, Capacity Market schemes, and five offshore wind projects supported by early CfD are in line with the rules on state aid.
The CfD budget will be split between up to three technology types – one for more established technologies, like onshore wind and solar, and one for less established technologies such as offshore wind, and one for biomass conversions.
Within each group, contracts will be assigned competitively – putting the UK in the forefront of driving down the cost of supporting renewable technologies and delivering better value for consumers.
The reforms build on the UK's status as one of the most attractive places to invest in energy globally, supporting economic growth and creating jobs.