Our Head of Analysis & Insights, Gavin Smart, looks at what the latest announcement from BEIS means for the UK’s tidal energy sector.
Quite a day for the UK tidal stream sector!
After a lot of hard work and detailed discussions between government officials and industry, BEIS today announced that Allocation Round 4 (AR4) will now include a ring-fenced budget of £20m for tidal stream.
This increases the total AR4 budget from £265m to £285m.
Further details are not yet available but the headline is (assuming all other elements of the CfD framework remain unchanged) that £20m at the administrative strike price of £211/MWh buys 34MW.
It’s possible that tidal could also win capacity in the main (non-ring-fenced) part of Pot 2 but would be competing on price with Remote Island Wind and (and potentially floating wind projects which don’t win capacity in the floating wind ring-fence) so I think it’s unlikely tidal stream projects will win capacity outside the £20m ring-fence. I’m sure many in and around the industry would be hoping for a larger budget, but this is £20m more than was available yesterday!
To give an idea of how much tidal stream capacity £20m would afford at different strike prices you can refer to this handy chart.
A few round numbers of what could be afforded from £20m:
40MW would need strike price around £185/MWh
50MW would need strike price around £155/MWh
60MW would need strike price around £135/MWh
80MW would need strike price around £110/MWh
100MW would need strike price around £97/MWh
120MW would need strike price around £87/MWh
Now we can look forward to seeing where the bids end up and how much capacity comes out of AR4.
This will pave the way for even more capacity in future allocation rounds and kick-start the UK tidal stream industry in a global sector with enormous potential.