Lord Berkeley – 2014 Parliamentary Question to the Department for Energy and Climate Change

The below Parliamentary question was asked by Lord Berkeley on 2014-06-05.

To ask Her Majesty’s Government what consideration they have given to the different financing structures of independent generators as compared to the large vertically integrated utilities in the development of the proposal to introduce Contracts for Difference auctioning; and whether any concerns have been raised by independent generators as to their competitive position in the event that Contracts for Difference auctioning is introduced before the Offtaker of Last Resort is operational.

Baroness Verma

My officials have worked closely with developers and financial institutions in working up the Offtaker of Last Resort (OLR) proposals in order to meet the needs of independent renewable generators. The policy design is at an advanced stage, and the detail of the proposals has been recently consulted on. We are on track to deliver the final policy and introduce enabling regulations ahead of first allocation of Contracts for Difference (CfD) applicants will have a high degree of clarity about the arrangements for OLR, in advance of the first auctions.

The move to competitive allocation of CfDs has been a long-standing feature of Electricity Market Reform. In early 2014, Government consulted on proposals to move straight to competitive allocation for some technologies, during which a number of independent renewable generators raised concerns that they had less certainty of their costs than Vertically Integrated Utilities and weretherefore faced with a higher financial risk that might undermine their ability to win a CfD through a competitive process. In the Government’s response, we set out our expectation that the Power Purchase Agreement (PPA) market will evolve such that PPAs could be signed on a conditional basis, providing greater cost certainty for independent renewable generators.