The IET welcomes the opportunity to comment on a call for evidence from The Department of Business, Energy and Industrial Strategy on ‘Enabling a High Renewable, Net Zero System’, that looks at options for evolving the current Contracts for Difference (CfD) mechanism for future allocation rounds.
Over the coming years, we will need to develop additional renewable supply, but also a flexible demand base that can make the best use of supply, transmission, and distribution system capacity.
The success of CfD to date, in terms of its contribution to decarbonising UK electricity generation, is significant and the opportunity now exists to develop and broaden this positive impact across the whole energy system.
The IET, in framing its response, has focused on the following:
- A 'Whole System thinking’ approach to policy and regulation
- A smart energy system that optimises value across all energy vectors and potential actors
- Digitalisation, data systems, interoperability, and transparency
- A coherent energy system policy framework
The IET believes that a Whole System approach using systems engineering principles is essential if the green recovery and energy transition are to be realised. Although creating an integrated and flexible energy system by coordinating supply and demand across heat, transport & power adds further complexity, it must be part of the whole.
A smart, low carbon, energy system that optimises the whole system: supply, consumption, and transmission/distribution capacity (potentially across energy vectors), is required to minimise the cost to consumers. The future energy system will be as much about people and their behaviour as about technology.
Although this call for evidence is focused on a fiscal mechanism i.e. CfDs, we would encourage the review to consider the wider objective and findings to date of the Energy Data Taskforce, particularly barriers to the effective use of data in the current energy system.
We recommend that the overall policy mix should be reviewed to ensure that it aligns with an overall Whole System and Net Zero policy strategy. This should help clarify what specific outcomes CfDs should deliver.