Achieving our ambitious climate targets will require significant levels of renewable deployment. Making sure we have the right policy framework to support this deployment will be crucial to delivering net zero while minimising costs for consumers.
Responses will be used to explore options to evolve the current Contracts for Difference (CfD) mechanism for future allocation rounds.
The IET is particularly interested in answering the following:
- How is the industry currently approaching developing renewables projects without CfDs? In what ways might non-CfD backed projects obtain revenue from wholesale and other markets, and secure investment?
- What do you consider to be the effects of increased low-carbon deployment on future wholesale power prices and renewable capture prices?
- How viable will investment in new renewable projects based primarily on wholesale prices be in future? Could this investment case be supported if there was more extensive deployment of flexible assets such as storage?
- How much longer after the 2021 allocation round should the current CfD be used? Is a price based on a short-run marginal cost market the most effective basis for a long-term renewables contract?
- Are there any changes or alternatives to the wholesale market that might facilitate merchant deployment?
- How can market participants be encouraged to provide contracts to secure low-cost investment in renewables?
- How could intermittent renewable generators change their operating or investment behaviour to respond to wholesale price signals?
- What would be the impact on the cost of capital of introducing greater exposure to the market price for power?
- In your view which of the potential options for providing increased exposure to market signals offers the greatest benefit to the consumer? Are there any other options that we should be considering?
- Should CfD generators be incentivised to account for flexibility and wider system impacts, and/or to provide balancing services to the system operator? How could this be achieved?
- Should the CfD mechanism incentivise minimum grid stability requirements (in CfD plants) to minimise system costs and help ensure secure and stable operation? How could this be achieved and what are the barriers?
- Do CfD projects receive the right incentives to locate in the optimum locations?
- Are there actions which Government should consider, outside of Ofgem’s current electricity network charging reviews, to help incentivise efficient market behaviour regarding the location of renewable assets?
- Should the CfD do more to enable the sustainable growth, cost reduction and competitivity of UK supply chains and how could this be achieved?
- What are the benefits of renewable projects using multiple low carbon technologies or being co-located with low-carbon flexible assets? Should the CfD support these projects and why?
- What are the benefits of projects with assets in different locations, including projects paired with flexible assets? Should the CfD support these and why?
- What changes would Government need to make to the Contract for Difference regime to facilitate the coordination of offshore energy infrastructure, what would be the benefits and costs of making them, and could there be a similar case for other renewable technologies?
- What changes would Government need to make for the Contract for Difference to facilitate deployment of offshore wind as part of a hybrid offshore wind interconnector project, and what would be the benefits and costs of making them?
- What role could international renewable projects play in our future generation mix in GB? Are there benefits to supporting these projects with government schemes and how could this be achieved?
- Should part-built project continue to be eligible to compete for CfDs after the fourth allocation round? Are we considering the right implications and what are your views on these?
- Can cost savings be achieved by developing extensions to existing projects, if so, how great are these cost savings, and what is the justification for these projects being supported through CfDs or any other government mechanism?
- Similarly, can cost savings be achieved by repowering older projects, if so, how great are these cost savings, and what is the justification for these projects being supported through CfDs or any other government mechanism?
The Institution of Engineering and Technology Trustees propose submitting a response to this consultation and invite comments from Members who have expertise in this area and have studied the consultation documents. In its capacity as a professional body, the IET will confine itself to only addressing those questions that are within its area(s) of competence.
For more information and a summary of the questions, please refer to the consultation webpage or our website.
Please respond no later than 9am 12th February 2021 to Caroline Holman, with "Enabling a High Renewable, Net Zero Electricity System: Call for Evidence" in the subject line.