Source · Select Committees · Business and Trade Committee
Recommendation 8
8
Deferred
Paragraph: 47
Review Contracts for Difference Allocation Round 5 parameters to reflect rising costs for renewables developers.
Recommendation
There is a risk that the Government has not accurately reflected rising costs for renewables developers in the budget for this year’s Contracts for Difference auction, putting the viability of future projects into question. We recommend that the Government reviews the parameters set for its Contracts for Difference Allocation Round 5 to ensure that they accurately reflect the cost pressures facing the sector.
Government response summary AI-generated
The government's response discusses the important role of onshore wind in achieving net zero targets and the reasons against setting a UK-wide target for its deployment. This completely deflects from the recommendation to review Contracts for Difference Allocation Round 5 parameters to accurately reflect rising costs for renewables developers.
Summary of the government's response below — read the verbatim text to verify.
Paragraph Reference:
47
Government Response
Deferred
HM Government · verbatim extract
Deferred
12. The Government sets Contracts for Difference auction parameters to balance carefully the need to secure new low carbon electricity deployment with the cost to bill payers. The budget for Allocation Round 5 (AR5) was set to reflect the firm pipeline of eligible projects known at that time. Once National Grid ESO has assessed applications and provided the Secretary of State with a valuation of all eligible projects, he will have the opportunity to increase the AR5 budget to reflect more accurately the actual pipeline of eligible projects. The AR5 Administrative Strike Prices (the maximum price a technology can receive per MWh of generation) were published in December 2022 and cannot be changed for this round. ASPs are based on the department’s latest view of potential project costs and future revenues, which are consistent with cost assumptions in the upcoming 2023 Electricity Generation Costs report. The ASP Methodology, which sets out how ASPs are calculated, includes consideration of project costs. This methodology is reviewed before every CfD round. Work for Allocation Round 6 has already begun. The Government continues to engage with industry stakeholders to understand better their concerns about cost pressures, which are impacting the sector globally, not just in the UK. It is expected that the broad inflationary protection offered by the scheme’s indexation to the Consumer Price Index (CPI) continues to be an attractive aspect of the CfD compared to most other schemes.
Read the full response on Parliament ↗