Government hints at auction shift in EMR delivery plan

The UK government has published its Electricity Market Reform (EMR) delivery plan after the Energy Bill received Royal Assent yesterday.

The government claims that the EMR measures will help unlock £40 billion of investment in renewables by 2020, supporting 200,000 green jobs in the process. The plan firms up the contracts for difference (CfD) regime and hints at plans to switch towards an auction based system.

Secretary of state for energy and climate change, Ed Davey commented: “We have driven the Energy Bill through Parliament on time to send out a clear signal to investors and industry. We have delivered the certainty they need and confirmed Britain’s position as one of the most attractive countries in the world to invest in energy generation.”

In light of recent new EU guidelines on renewables support, the government has confirmed that it is “considering” introducing competition for established low carbon technologies when the CfD regime is introduced. DECC will announce more on the move to an auction-based CfD in “early 2014”.

Reacting to the news, the Renewable Energy Association’s chief executive, Dr Nina Skorupska, welcomed the clarity on CfD terms for investor confidence. She explained: “It is encouraging to see many of the pieces falling into place.

“The transition to auctions acknowledges and could accelerate the cost reductions of the more established technologies, which is good news for industry and rate payers alike. But if it is rushed it will undermine investment, so we are glad to see government has listened to our concerns and will consult industry before reaching a decision.”

In addition to the measures outlined today, the renewables sector still has serious reservations about the current route-to-market for independent generators under EMR. DECC has recognised the problem and has developed a proposal for an ‘Off-take of Last Resort mechanism’, that would provide a guaranteed minimum price for independent renewable generators. DECC is also undertaking a CfD market readiness report which is working on how current Power Purchase Agreements (PPA) could be changed to better complement the CfD regime.  

The EMR delivery plan also confirms the strike prices for renewables from 2014/15 to 2018/19, subject to State Aid clearance, and potential deployment rates to 2020. The strike prices for solar PV will be as announced on 4 December 2014:

As for solar’s predicted deployment, the EMR deliver plan projects that just 2.4-4MW of >5MW solar PV will be installed by 2020. However, the figures published in EMR are in addition to the proposed deployment under the Renewable Obligation and are not “government forecasts or targets”.

The full EMR deliver plan can be viewed here.