Reform UK rattles RWE and others with threat to 'strike down' CfD contracts

British right-wing populist party Reform has warned offshore wind developers that it will seek to strike down Contracts for Difference awarded in future UK renewable energy auctions if it wins power.

Less than a week after declaring that a Reform UK government would target wind farms and solar farms with a windfall tax to raise £10bn a year, deputy leader Richard Tice sent a letter to leading developers such as SSE, ScottishPower, Orsted, Equinor and Vattenfall warning that they should treat any subsidised contracts signed under the Labour government as “politically and commercially unsafe”.

"If elected, or if we hold the balance of power, we will immediately reassess all net zero commitments, prioritising low cost, reliability and security of supply over spurious decarbonisation targets,” it read.

“As a first step, we will seek to strike down all contracts signed under AR7. You should treat any long-term revenue streams as politically and commercially unsafe.”

Tice warned the developers that their participation in the UK government's upcoming AR7 allocation round for CfDs "carries significant political, financial and regulatory risk for your shareholders".

The reforms are collectively intended to ensure record allocation of renewable energy capacity in AR7 and next year’s AR8.

The government is pursuing ambitious targets of deploying 43-50GW of offshore wind capacity by 2030, up from nearer 16GW today. It is also hoping to deploy between 27-29GW of onshore wind, almost double its current capacity, and 45-47GW of solar power.

AR7 is seen as a vital step toward achieving the government’s Clean Power 2030 plan, intended to virtually remove fossil fuels from the UK grid by the end of the decade.

Stonehaven energy consultant Adam Bell said a commitment by Reform to tear up contracts signed by a previous government amounts to a direct challenge to the rule of law and could ultimately inflate CfD costs.

"If the rule of law holds, this is positive for any serious investor. They can simply take the government to court for the forward value of the CFD and then they still have an asset they can use to make even more cash…unfortunately the 'if the rule of law holds' bit is where investors may take fright,” he warned.

In its own response, the Labour government accused Reform of “actively trying to discourage businesses from investing in clean energy in the UK” and "undermining the UK’s national interest”.

Tice said AR7 will "add billions of pounds of subsidies and other costs to UK energy bills as well as threatening the stability of the grid”. He said it was imposing “intolerable costs on households and manufacturers”.

Rising Reform

Reform UK's rise as a political force was initially built on anti-immigration campaigning, but the party has increasingly turned opposition to net zero as one of its top issues, which leader Nigel Farage has described as “the next Brexit”.

Reform’s attacks are based mainly on the accusation that electricity bills are too high because the government is imposing its vision of net zero through green levies.

Tice also alleged that the government no longer has a social licence to build "intrusive pylons, substations and offshore infrastructure." He warned last week that Reform would force National Grid to take down new transmission lines and bury them underground.

The party has also attacked policies aimed at phasing out gas boilers and combustion engines, along with the creation of urban low emission zones, as attacks on freedom.

Miliband stands firm

Energy Secretary Ed Miliband, who is convinced that there is overwhelming public support for net zero, has gone on the attack and said he plans to spotlight politicians who reject net zero policies as betraying future generations and do so through the form of a regular new “state of the climate” update to parliament concerning the climate crisis.

But the dramatic rise of Reform UK in polling was reflected in local election gains earlier this year. Some Reform-led councils are set to drop net zero policies at a local level.

This trend has pulled the opposition Conservatives further to the right. The party that put a commitment to reach net zero by 2050 into law when they were in power have now said that they will drop that target if re-elected.

The implications of Tice's letter were reverberating strongly around the sector on Thursday.

"Contracts like CfDs are not made by political parties. They are issued by the Crown through statutory bodies, governed by independent regulators, and backed by the full weight of UK sovereign credibility," posted John MacAskill, group managing director of renewables at OWC on LinkedIn.

"When a party says, “We’ll revisit or revoke what the last governmentt signed,” they’re not just attacking policy...they’re attacking trust. And without trust, there is no capital. No investment. No infrastructure."