The UK government will introduce non-price factors in its Contracts for Difference (CfD) program for renewable energy projects as a major shift from the cost-only model to ensure the viability of such projects in the long term.

The new approach could mean that applicants would have to show how their projects would help improve the supply chain sustainability, address the skills gaps, foster innovation, and enhance the sector’s system and grid flexibility and operability.

It is also expected to encourage more investment in the sector, create more jobs, and improve the country’s energy security.

The government will open the proposal for comments from the industry stakeholders about a new idea to evaluate bids on their cost-effectiveness and wider benefits for the renewable energy sector.

It will analyze the responses for a proposed Call for Evidence and consult on any suggested program changes if they are more effective than other policy options.

This Call for Evidence is part of the government’s work to continue to evolve the CfD program as it considers long-term market arrangements through the Review of Electricity Market Arrangements. The proposed reforms could help drive further investment in renewable energy deployment and improve energy security in the UK.

The CfD program awards contracts to renewable energy generators, such as offshore wind farms, based on their bid price, which has previously helped drive down the green tariffs in the country.

The program has successfully lowered renewable energy prices since the first auction in 2015, with the offshore wind price falling by almost 70% by 2022. The program has supported new low-carbon projects in Britain with a total capacity of 26.1 GW.

By investing more in supply chain sustainability, the sector could reduce its environmental impact and secure the resources and materials it needs for long-term growth. By investing more in skills development, the industry could train more technicians to build and maintain more advanced renewable energy generators.

Minister of State for Energy Security and Net Zero Graham Stuart said that the government wants to go further to ensure it maximizes the program’s potential to improve energy security and provide renewable energy developers who can make the necessary investment in supply chains and innovation, ultimately making for a more robust sector and helping the economy to grow.

The CfD program has helped the UK diversify, decarbonize, and domesticate its energy supplies, securing almost 11 GW of low carbon capacity in the last round – enough to power 12 million British homes.

The government has also committed a further budget of £205 million (~$254 million) to the program for the fifth allocation round, demonstrating its continued support for green industries and jobs. Since late 2020, the program has attracted billions of pounds in private investment and supported 68,000 green jobs nationwide.

The UK government is also considering various policy options to prevent carbon leakage. One of these options is a carbon border adjustment mechanism, which would impose a carbon tax on imports based on their carbon content.

Early last year, the country outlined an Energy Security Strategy to accelerate the deployment of new renewable projects, including wind, nuclear and solar, to contribute to 95% of the electricity generated and aimed at installing 70 GW of solar capacity by 2035.