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Independent renewable generators will be able to sell power at a £25/MWh discount if other arrangements fall through, under government proposals published on Tuesday.
The “offtaker of last resort” mechanism is intended to cut risk for small players by guaranteeing a buyer for their power, albeit at unattractive rates.
Some suppliers, expected to include the big six, will be obliged to offer backstop power purchase agreements (PPAs) to generators who find themselves unable to secure commercial deals. They are expected to be used as a short term safety net rather than a long term arrangement.
Energy secretary Ed Davey said the mechanism would give generators and lenders greater confidence in the PPA market and promote competition.
The exact level of the discount is to be determined, but the Department of Energy and Climate Change is “minded” to fix it at between £20 and £30/MWh. That “strikes the right balance” between the risk of cost to consumers and revenue security for generators, the consultation document said.
Backstop PPAs will be open to all renewable generators, not just wind as originally proposed.
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