Call for 80% green energy mandate for suppliers

Suppliers should be subject to an 80 per cent decarbonised electricity mandate by 2030 and the focus of Contracts for Difference (CfD) shifted away from mature renewable technologies, according to a new report by a government energy adviser.

The report ReCosting Energy, which has been published by ex-Conservative MP Laura Sandys’ consultancy Challenging Ideas, calls for a government mandate on suppliers to deliver 80 per cent of their electricity from decarbonised sources by the end of the decade.

For heat and transport, the report suggests a “different but clear trajectory” and that a target cost should be set for whole system decarbonisation by 2050.

The report also urges an overhaul of CfDs, which it says have experienced “significant mission creep” to become the “default support” for mature technologies that have reached price parity with fossil fuels.

Moving as many developers of mature renewables away from CfD will allow government support to invest in immature technologies and demand side assets, it says.

In the shorter term, the report recommends enabling the Capacity Market to be accessed by assets receiving CfDs, making storage mandatory for all generation over 500MW and progressively reducing access to curtailment payments with none paid beyond 2030.

Government support must go “faster and further” into support for the immature technologies and non-generating assets, such as long-term storage and hydrogen, which the report says are “crucial to decarbonisation” but are not currently unlocked by the market.

A review of government support mechanisms, markets and regulations should end those that favour fossil fuels and the Renewable Energy Guarantee of Origin regime should be tightened up to mean “no more greenwashing”.

The report says its proposals to significantly reduce competition from fossil fuels with new low-carbon obligations will go “quite a way” to help de-risk the capital market for mature renewables.

The report also recommends that the risk of supplier failure costs should be borne by the companies that create them rather than consumers and for the urge to cap system charges to be “resisted”.

It says: “Far too many risks are passed on and smeared across all customers when risk should sit with businesses that create them and are best placed to manage and be rewarded for risk.”

A fully-costed system methodology should be developed to be used by all regulated assets, regulation and policy, which would be audited by the National Audit Office, the government’s spending watchdog.

Overall, the report calls for a “philosophical change” in how the energy system is looked at from a consumption to an optimisation model. “Most importantly”, this will involve “recognising, rewarding and incentivising consumer and demand side optimisation”.

And it warns that much government investment and regulation is still focused on generation and more needs to be directed to system design and efficiency tools.

Sandys said: “The current system is a smouldering platform of silos, with commodity prices no longer able to be the proxy for whole system costs. We are currently unable to effectively integrate and unlock the real value of all the new innovations that are helping to decarbonise our economy – from electric vehicles, to smart electricity tariffs, to long term storage. Their value is cannibalised which is holding back the pace of decarbonisation, wasting money and giving customers a raw deal.

“This new report paints a picture of a new system that rewards customers, properly values demand-side measures for the first time, and unlocks the huge investment required to get us to net zero. It proposes new metrics and incentives to encourage people to buy electric vehicles, for developers to build inter-seasonal storage, and for everyone to do more with less.”