Utility Week

UTILITY WEEK | APRIL 2022 | 23 Generation can't happen or won't happen. I think espe- cially for co-located projects – those with batteries – they're looking to make money out of arbitrage opportunities and partici- pate in the Capacity Market and do these other things, so there will be projects that go merchant, but for developers with low risk appetite this is quite a nice opportunity for them." Developers' reluctance to proceed on a merchant basis is demonstrated by the large 8GW pipeline of shovel-ready projects that have planning permission but have not been given the final go-ahead. Pizzey says there is also another 8GW that is also in the process of securing consent. Annual pot 1 auctions should ensure this gets built out: "Providing something every year like clockwork, a bit like the Capacity Market right now, just provides a level of cer- tainty and security and knowledge that you won't have to wait too long to re-enter that project." Pizzey says the auctions will provide the "constant conveyor belt of projects" that the UK needs rather than the "lumpy and bumpy" deployment that has been seen previously. "The move to annual auctions is hugely welcomed by the everyone in the industry," says Renewable UK director of future energy systems Barnaby Wharton. "The problem we've faced with less frequent auctions is that you see projects that may just miss out on one auction, in this case, then having to wait nearly three years for the next auction. "And clearly maintaining a project for that time costs money and ultimately that money has to be borne by the consumer. Moving to annual auctions gives confidence that pro- jects will be able to get away sooner. It means they're hanging around for less time and sup- ports moving towards our net-zero targets." "The ongoing commitment and recogni- tion of the important role that onshore wind and solar can play, and will have to play, in order to meet our net-zero target is really important," he adds. "I think it is a hugely significant announcement that they will be continuing support for those technologies going forward." Like Pizzey, Wharton says some develop- ers may still want to go down the merchant route: "These are now increasingly mature technologies and I'm sure some develop- ers will look at current energy prices and think actually it will be worth taking the merchant risk." But he says most will prefer a fixed income stream "and it's important that we get the volumes that the CfD will bring". Regen's chief executive, Merlin Hyman, says the move will give the whole industry the confidence to start making long-term investments they may have been holding back on: "It will allow developers to build their portfolios, utilities to invest in grid infrastructure, and the supply chain to build job skills capabilities. "If I don't know when the next auction's going to be – it's probably two years but you don't know what's going to be in it – then it's quite hard to invest against that." Asked whether the government could do even more to strengthen this signal, for example by setting out the likely parameters for future auctions, Hyman says "it's not as clear as it could be" but the industry can make infer- ences from net-zero scenarios and govern- ment papers. Pizzey thinks this is not likely to happen: "The government don't necessarily like to pick winners or force the market too much, so just announcing annual auctions is a sig- nificant move in itself. I don't think they'll ever put targets for onshore wind and solar like they've done for offshore wind. I think that just won't happen from talking to BEIS [the Department for Environment, Energy & Industrial Strategy] and other people. "I think they'll have to fill in the blanks, and just stating the increased frequency of auctions and allowing those technologies to participate is probably enough". However, Wharton doesn't see why this continued overleaf

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