Yesterday afternoon renewable industry representatives gathered in London for the HOC Energy and Climate Change Committee: ‘Pre-legislative scrutiny of Draft Energy Bill.’
The session was lead by Tim Yeo MP, Chair of the Energy and Climate Change Select Committee who was joined by speakers Dr David Kennedy, Chief Executive, Committee on Climate Change; Professor Catherine Mitchell, Professor of Energy Policy, University of Exeter; David Newbery, Emeritus Professor of Economics, University of Cambridge and Simon Skillings, Senior Associate, E3G.
Members of the panel, which included the Renewable Energy Association’s Chief Executive Gaynor Hartnell, Ian Temperton, Head of Advisory, Climate Change Capital, and Gordon Edge from RenewableUK, agreed that while Government’s plans are along the right lines there is still much that needs to be done.
All of the panel members during this second session commented on the complexity of the Energy Bill, commenting that while the contracts for difference (CFD) could work the confusion surrounding how to attain them will prevent any real progress towards our targets.
Edge explained that, “Once you have a CFD the risk for the generator is significantly reduced, however there is so much confusion around how to get one in the first place.”
On the year-ahead reference price for non-intermittent renewable generators, Hartnell said: “It may be preferable for non-intermittent generators to use a nearer term reference price. Project developers have not yet considered their electricity trading strategies but the current proposals may result in an unsustainable requirement for posting of collateral.”
Panel memebers also reinforced a message emerging from the previous session on ‘one-size-fits-all’ policymaking, that the role of nuclear in EMR is likely to create problems with the EU in terms of state aid, and that it is unacceptable for renewables to get caught up in this.
Hartnell further commented on the REA’s solution to the problem of increased project development risk under the new proposal, saying: “DECC intends that the new contracts are awarded at the point when the final investment decision is taken. Project developers will be expected to pay the hundreds of thousands of pounds of project development costs up front with no guarantee that they will be allocated a contract.
“We propose a two stage process, where developers reserve the right to be awarded a contract for difference once they have received planning permission. They would then have a limited period of time to reach financial close. As long as they reach financial close within this period, they will then be awarded the contract itself.”
Panel members are expected to submit further written evidence on these points post meeting in a bid to decrease the current confusion and complexity surrounding the upcoming EMR. The full video of the meeting can be viewed below.