Energy secretary Amber Rudd is to attack how renewable energy contracts were awarded under previous regimes in a speech to outline the principles of a new UK energy strategy.
The text of the speech was reported by the Telegraph yesterday and looks set to outline the Department of Energy and Climate Change’s energy strategy looking forward, including putting energy security as its “first priority”.
This will come at the expense of renewable energy with the secretary of state to criticise the manner in which development contracts were handed out in uncompetitive frameworks.
“Success was measured by how fast renewable energy could be installed, not by how cost-effective our carbon cuts were or what the impact on energy security would be,” Rudd will say.
While the Contracts for Difference framework, designed to replace ROCs, introduced a competitive element its early awards under the Final Investment Decision enable for Renewables (FIDeR) process has been resoundingly criticised for the poor value for money it offered.
In June the Competition and Markets Authority’s early findings from its investigation into the energy market found that contracts under FIDeR were found to be between 30 and 60% higher than those awarded under the competitive CfD allocation several months later. The eight contracts awarded under FIDeR equate for 58% of the total Levy Control Framework (LCF) budget.
Rudd’s comments are likely to be seen as a thinly veiled critique of DECC’s spending under her predecessor, the Liberal Democrat, Ed Davey, who has been a vocal critic of Conservative energy policy since losing his seat at May’s general election.
While the secretary of state has continually pressed the need to tackle an overspend within the LCF, Davey has accused the Conservative Party of using higher than expected spending (although spending which is still within the £1.5 billion headroom cap) to justify politically motivated cuts to renewable energy.
However Rudd is to also take a swipe at the business models of renewable energy companies that she argues to have been based on subsidies. “We need to provide a level playing field, where success is driven by your ability to compete in a market, not on your ability to lobby for subsidy,” she will say.
Her remarks will anger a solar sector which has campaigned for a more sensible approach to subsidies, acknowledging that they should indeed degress but in a more tapered fashion rather than the “boom and bust” model which former energy minister Greg Barker said would be bad for the industry.
They also appear to contradict the government's approach to nuclear energy. The decision to award Hinkley Point C a strike price of £92.50/MWh – which Rudd said during a select committee hearing last week would add £6 onto a regular household's energy bill per year when it comes on stream – has also been the source of much contention within the energy industry and last week EDF's largest shareholder publicly voiced his concern that the hugely expensive deal placed the future of the entire company at risk.
DECC’s first energy statement since becoming a Conservative-led department is to be unveiled later this month.