The next wave of renewable energy funding has been set for eighteen months time in a bid to build on the dramatic fall in technology costs seen in the latest round of auctions.

Renewable developers will compete for a slice of £557m to support new energy technologies such as offshore wind where costs have halved in recent years.

Wind farms built on remote Scottish islands will also be allowed to vy for funding after ministers agreed to make an exception to the controversial stance against funding onshore wind.

Wind farms based on Orkney, Shetland and the Western Isles face similar challenges as offshore projects in terms of connecting to the mainland grid, but could supply as much as 3pc of Britain’s electricity demand.

The £557m pot is likely to be staggered over two separate auctions offering a chance for island wind developers, incuding EDF Energy and SSE the chance to compete against projects which missed out on the latest auction and are eager to revive their applications.

Scottish Power Renewables - the developer arm of the Big Six supplier - dropped out of the running for the last auction in August before it began, saying its East Anglia 2 project off the Suffolk coast would not be ready in time.