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In 2015, the Conservative government blocked both onshore wind and solar from accessing the CFD program, the U.K.'s main method for supporting renewables, and offered no replacement.

The Contracts for Difference (CfD) scheme is the government’s main mechanism for supporting low-carbon electricity generation. CfDs incentivise investment in renewable energy by providing developers of projects with high upfront costs and long lifetimes with direct protection from volatile wholesale prices, and they protect consumers from paying increased support costs when electricity prices are high. Once the preceding renewable obligation scheme closed to large-scale solar in 2015 and wind the year after, all available backing for the technologies ended.

However, earlier this month has reversed the ban hence opening a new route to market via the contracts for difference (CFD) auctions. A consultation for the next round of the auction confirmed that both onshore wind and solar would be included. Floating wind projects will also likely be given their own access to the CFDs without having to compete with fixed-bottom offshore wind as they currently do.

Both onshore wind and solar markets have stalled in recent years, even as the U.K. has maintained its global leadership in offshore wind.

The U.K. built 629 megawatts of onshore wind in 2019, but all but one of those projects had previously qualified for support under the shuttered subsidy programs. That compares to 2017, the peak year for installation, when the U.K. added 2.6 gigawatts of onshore wind.

The decline has been even worse for solar, with just 233 megawatts built last year in what was once a leading global market. The U.K. built 4 gigawatts of solar in 2015.

The key question of how much support will be available for onshore renewables remains an open one. But that support for new land-based wind and solar projects is even politically possible now is a big victory for the sector.

“The Government is pressing ahead with action to meet our net-zero emissions target quickly and at lowest cost to consumers and businesses,” said Hugh McNeal, chief executive of trade body RenewableUK. “As one of the U.K.’s cheapest power sources, new onshore wind projects will be a huge boost for jobs and investment in local economies across the U.K.”

The CFD program requires bidders to offer power at a set strike price. If the wholesale power price dips below this, the government makes up the shortfall. If the wholesale price is higher, the extra revenue is paid back to the authorities. The contracts last 15 years. Former Prime Minister David Cameron said in 2014 that the public had “had enough” of onshore wind before backing nuclear power and fracking as the keys to U.K. energy security.

That was perceived as an effort to appease middle-class rural voters who opposed the siting of new wind farms. Today’s move is partly a nod to the U.K.’s role as host of the U.N. climate change talks later this year and the widespread, cross-party support for decarbonization. Attitudes about climate change have shifted dramatically in the country, with the issue rising up the agenda in last year's election that gave Prime Minister Boris Johnson a strong mandate. The government has already significantly increased the offshore wind target from 30 to 40 gigawatts by 2030 and accelerated the phaseout of combustion engines.

Access to support is one thing; the level of support is quite another. The budget and design for each CFD round are determined after the consultation period. The next round is scheduled for September 2021. 

The CFDs historically have been split into two streams. Prior to the ban, onshore wind and solar competed in the established technology track. Offshore wind is considered to be an emerging technology. The consultation launched Monday has asked for views on whether a third pot, dedicated to fixed-bottom offshore wind should be considered. Floating wind projects would compete for budget with other emerging technologies such as geothermal and combined heat and power biomass plants. No scenario has been mooted that would pit onshore and offshore wind against each other. 

A lot has happened since the ban started, including Brexit. Offshore wind prices in the most recent CFD auction dipped below £40 per megawatt-hour. The government has also legislated a 2050 net-zero emissions target that could require renewable generation to quadruple from current levels by that date.

The European Investment Bank considers offshore wind to be early-stage rather than an emerging tech. It has said floating offshore wind will be eligible for innovation funding.