Government to use higher load factors for CfD scheme
Published 31 August 2018
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The government is pressing ahead with plans to assume higher load factors for renewable projects supported by bill payers through contracts for difference (CfDs).
A government consultation on the future operation of the scheme, which was launched last December, proposed that CfDs should use higher assumed load factors, the ratio of how much electricity a generating unit produces over a period divided by its theoretical maximum output.
The proposal is designed to guard against the risk that CfD-supported projects produce more power than expected, resulting in greater than initially forecast payments by electricity suppliers that must then be passed onto consumers.
In the second of two responses to a consultation, which was published yesterday (30 August), the government says that it will implement the proposal to use higher load factor assumptions in the valuation formula for projects in the next CfD allocation round.
The assumptions will be an upper portion of the expected distribution of load factors for each renewable technology, rather than the central assumptions currently used
However, the response states that the government does not intend to use different load factor assumptions for individual technologies in the next allocation round, so that for example they could vary from one area to another.
The document says that the government will keep this position under review for future CfD rounds.
The response also says the market price assumptions used at the time of allocating CfD contracts will be changed.
Forecasts of the expected average prices that will be captured by new baseload and intermittent technologies would be used for each delivery.
The proposed changes will apply to the next round of the CfD auction which the government recently announced is due to take place in May next year and which it has previously said will embrace remote island onshore windfarms.
The government has allocated up to £557 million of support via CfDs until 2025.
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