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The latest findings from the Competition and Markets Authority (CMA) investigation into the energy market could have a “significant impact” on renewable policy, with measures to overhaul contracts for difference, according to the Renewable Energy Association (REA).
The group’s finance policy analyst Mark Sommerfeld told Utility Week: “The impact the CMA findings could have on renewable policy is potentially significant. It could open up CfD [contracts for difference] policy to more people.”
In its provisional findings, the CMA suggested the mechanism whereby CfDs go directly to generators through a non-competitive process could restrict competition, leading to higher bills for consumers.
The government has faced criticism in the past for awarding some projects direct contracts, including Hinkley Point C in 2014. This causes some technologies such as offshore wind, to only compete with other offshore wind projects.
The CMA said: “We recommend that [the Department of Energy and Climate Change] Decc consult on the basis of impact assessments at two stages: before entering into negotiations with prospective generators in order to identify the possible costs and the benefits that may arise from supporting a given technology; and after the negotiations… and the provisional agreement of a strike price…
“The aim of this proposed remedy is to ensure that, in the future, if Decc is considering allocating a CfD outside the competitive auction process, it undertakes a clear and rigorous analysis of the impact of doing so and consults on this basis before reaching a final decision.”
RenewableUK backed the CMA’s calls for an overhaul of contracts for difference, saying its proposals would “increase investor confidence and drive down project costs.”
Deputy chief executive of the trade body, Maf Smith, said: “The CMA rightly identifies visibility as a key issue for developers – setting out proposed budgets at least a year ahead of each auction, and specifying which technologies can compete for each pot, would increase investor confidence and drive down project costs.
“The onshore wind industry urgently needs clarity about whether it will be able to bid for CfDs on the grounds that it’s the lowest cost option, helping to keep consumer bills as low as possible.”
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