UK government pauses next year's renewable energy auction after subsidy review exposes costs
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The UK is delaying the 2026 Contracts for Difference auction for wind and solar projects while it reassesses a subsidy system that has driven up costs, strained the grid and piled more pressure onto households and businesses.
Mayor Andy Burnham has ordered a halt to new wind and solar power subsidies as part of a review of the Contracts for Difference (CfD) programme. The government announced on Tuesday that the 2026 CfD auction will be paused to ensure the scheme benefits consumers instead of locking in more expensive energy policy failures.
Energy Minister Michael Shanks told the House of Lords environment committee that the pause will allow reforms to the CfD process, citing concerns that renewable capacity is outpacing grid upgrades, leading to bottlenecks and curtailment of wind farms.
Shanks said the government is drafting a plan to limit future capacity growth in Scotland, where the most severe bottlenecks exist, and that the method of awarding subsidies will also change. He added, "We do now want to pause before the next auction round to look at whether we need more significant changes to the contracts for difference scheme to make sure they work for the consumers of the country."
Chancellor John Healey, in the recent budget, emphasized that cheaper energy is a priority for Labour. Treasury minister Dan Tomlinson said Burnham will pursue a new energy pathway to reduce costs for businesses and households, noting that the system costs of new power must be considered given growing constraints and distribution expenses.
Tomlinson stated, "We will only procure clean power through auction round eight if we are confident it will lower bills and we will reform the contract for difference for the next auction to support building the lowest cost system, fixing market distortions and siting assets in the right place."
Energy Secretary Miatta Fahnbulleh warned that delivering clean power while keeping bills low will be challenging, adding that the public measures success by energy bills rather than gigawatt capacity.
James Alexander, chief executive of the UK Sustainable Investment and Finance Association, expressed concern that the proposed review could affect investor confidence, saying, "Investors will be concerned by comments from the energy minister that cast doubt on next year's renewable energy auction. The Contracts for Difference model has been a crucial driver of investment in clean power."
The government has been approached for comment.