DECC may have overpaid on early CfD contracts, report finds

DECC may have awarded overly generous support to the eight projects selected for the early contracts for difference (CfD), a new report has found.

The National Audit Office (NAO) said it was “not convinced” that consumers’ interests had been adequately protected during the award of £16.6 billion worth of contracts.

Last year the government announced an early award round for CfD to ensure investment in the sector continued in the run up to the scheme’s official start in 1 April 2015. The tranche of funding represents 58% of the £28.6 billion CfD budget to the 2020/2021 tax year. Five of the eight projects were offshore wind farms.

The money was awarded without competition. DECC is currently consulting on a plan to shift solar projects over 5MW in size from the current Renewable Obligation scheme to a competitive CfD mechanism that would see it vying with onshore wind for capacity.

With £16.6 billion of the £28.6 billion budget out to 2020/2021 already awarded, the solar sector is still awaiting confirmation of how much of the remaining funds will be available to it.

Margaret Hodge MP, chair of the committee of public accounts said: “…these projects will generate just 5% of the renewable electricity required [to hit the 30% target].

“At the same time by committing so much funding up front the Department has limited its options for future investments.

“I am also frustrated that, despite the huge consumer subsidy that has gone into supporting these projects, the Department has failed to put in place any arrangements to recoup consumers’ money if providers make bigger-than-expected profits from these projects,” added Hodge. “This is an issue we have raised as a Committee before: private providers must not be allowed to make excessive profits at the expense of consumers and taxpayers.”

Shadow energy minister Tom Greatex urged the government to reconsider a decarbonisation target for the power sector to add an extra layer of certainty for investors.

“This report raises serious questions about whether the government's mismanagement of contracts for clean energy projects will add a totally unnecessary cost to consumers' energy bills, which have already increased by more than £300 under David Cameron. Consumers will be rightly outraged if they are left to foot the bill for this Tory-led Government's incompetence,” he said.