The government is proposing changes to the Contracts for Difference (CfD) mechanism that it said would drive down the cost of energy generation.
In a new consultation, the Department for Business, Energy and Industrial Strategy (BEIS) has outlined proposals to make supply chains across the low-carbon electricity generation sector more competitive, productive and efficient as part of the CfD scheme.
Suggestions include more rigorous questioning and scoring of Supply Chain Plan questionnaire responses, along with introducing an interview, which would allow for greater scrutiny of CfD applications, and raising the pass mark to make qualification more robust.
These potential changes would ensure generators commit to a range of actions to increase competitiveness of supply chains, the government said, therefore driving down the cost of energy.
The cost of energy has been thrown into the spotlight in recent months as wholesale prices have reached significant highs, with the energy price cap rising 54%.
A range of support measures were announced by chancellor Rishi Sunak last week for households facing the jump in bills, including a rebate on energy bills, while suggested solutions by others include removing VAT from energy bills and a windfall tax on north sea oil and gas producers.
Since the start of the energy crisis, the government has stressed the need for domestic low carbon energy sources to reduce Great Britain’s exposure to global gas prices, committing £100 million of funding to EDF’s 3.2GW Sizewell C nuclear plant in Suffolk last month.
The government’s CfD consultation also includes a suggestion to extend the Supply Chain Plan process to cover some emerging renewable energy technologies, such as floating offshore wind, to ensure Supply Chain Plans are included for technologies expected to experience significant growth and mass deployment in the next CfD round.
Supply Chain Plans are put forward by developers of projects that have a capacity of 300MW or more in their CfD application, and are assessed in a questionnaire before the developer can compete in the CfD auction.
In this questionnaire, applications choose the Supply Chain Plan commitments they want to make, with these then tested for quality and ambition ahead of the application being passed.
The latest round of the CfD – AR4 – opened in December, while a month later it was announced that around £39,222,407 would be returned to electricity suppliers through the CfD scheme as a result of the high prices.
The previous round of the CfD saw 6GW of new offshore wind capacity contracted for, with prices as low as £39.65/MWh- a record-breaking figure.