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Uncertainty as legal challenge derails UK renewable energy auction


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Uncertainty as legal challenge derails UK renewable energy auction

The U.K. government has received a legal challenge to its flagship renewable energy support scheme, delaying the awarding of as much as 6 GW of new capacity by at least two weeks.

Bidding in the third allocation round of the contracts for difference, or CfD, tender began on Aug. 9, with some of Europe's largest energy companies — Iberdrola SA, Innogy SE, EDP - Energias de Portugal SA, Engie SA, Equinor ASA and SSE PLC — among those competing for contracts.

The bid window had been expected to close on Aug. 15, but as a result of the legal challenge has now been extended to Aug. 29 by National Grid, which administers the auction. The results will not be announced until Sept. 20-23, according to trade publication Business Green.

A spokesperson for the U.K. Department for Business, Energy and Industrial Strategy said the CfD supported about £490 million of investment in renewable energy. "We run the scheme lawfully and will be contesting this claim," the spokesperson added.

While the basis of the legal challenge is unknown, industry participants have speculated that it may be to do with the government's wider renewable energy policy, rather than something specific with this auction.

Under the CfD, contracts are only available for less-established technologies, such as offshore wind, advanced waste treatment projects and tidal power, while mature technologies, such as onshore wind and solar photovoltaic, are excluded. A group of European energy companies, including some of those bidding in CfD round three, recently came together to call on the government to once again support the development of onshore wind.

"As all applicant projects qualified after review one imagines this is about the general application of policy," Gareth Miller, CEO at energy consultancy Cornwall Insight, wrote in a LinkedIn post. "Detail is scant, but likely reasons could relate to either exclusion or inclusion of certain technologies from the auction [given the] absence of published rationale of impact assessments to support such decisions."

News of the delay comes after the U.K.'s capacity market scheme, which provides incentives to power plants to act as backup generation during times of peak demand, was ruled illegal in the European courts in late 2018.

It is the latest instance of a judicial review involving the U.K.'s Energy Department. In 2007, the government lost a legal challenge from environmental campaign group Greenpeace around its nuclear power policy.

Then in 2014, a group of solar developers failed in an attempt at challenging the government's decision to end subsidies for large-scale solar projects.

Luke Clark, head of external affairs at trade association RenewableUK, said the organization was "confident" that the CfD auction will deliver record amounts of new capacity at record low prices.

He added, "The auction is a competitive process and firms in the sector understand that dates can change for different steps in the process."