The competition and markets authority (CMA) has called into question the value for money of the eight CfD projects which were awarded funding without competition.
The eight projects were awarded funding in April 2014 without any price competition. The early CfD contracts for the eight projects equates to a lifetime cost of £16.6 billion and accounts for 58% of the £28.6 billion CfD budget to the 2020/21 tax year.
However, the CMA has raised questions about the allocation, warning that it could mean energy bill payers face unnecessarily high bills. The CMA states: “By being awarded outside of a competitive process, there are risks that such contracts will unduly raise prices for consumers.”
Indeed, in October last year the committee of public accounts said that the Department of Energy and Climate Change (DECC) had failed to get value for money from its early CfD allocations. Margaret Hodge MP, chair of the committee explained: “The department argued that the early contracts were necessary to ensure continued investment. But its own quantified economic case shows no clear net benefit from awarding the contracts early. Indeed, if the department had used price competition, it should have led to lower energy prices for consumers who are already facing hefty charges.”
On the other hand, the CMA is broadly positive about the move to competitive CfD allocations. The authority notes that there is a “relatively strong argument for replacing ROCs with CfDs” but warned that it would keep a close eye on the CfD auction results in February.