The Contracts for Difference (CfD) scheme should be expanded, the National Infrastructure Commission (NIC) has recommended as one of a number of measures to strengthen confidence in the economy.
In a letter sent to the Chancellor, Rishi Sunak, NIC chair Sir John Armitt said that the government should focus on opportunities to “strengthen confidence in the economy over the long term”, stating that the NIC would support early action in a number of areas.
Firstly, the NIC would support building a strong pipeline of CfD auctions, with Armitt stating the industry needs "clarity on dates and scale" despite the positive shift in government policy in this area.
“Given the investment comes from the private sector and progress here would support net zero, this strikes us as a potential ‘quick win’,” Armitt said.
The government unveiled plans to reopen the CfD auctions to Pot 1 technologies – solar PV and onshore wind – for the first time since the first allocation round in March. Its consultation on the proposal, as well as a number of other changes such as the extension of the negative pricing rule, is currently ongoing, with the closing date for responses pushed back due to COVID-19.
In his letter, Armitt said that private investment as a whole should be incentivised by government policy on energy, in particular the development of new power and heating technologies such as hydrogen and carbon capture and storage.
Clear guidance on the direction of policy and regulation, that is appropriately supported with public money for R&D and pilot projects will stimulate this private infrastructure investment, Armitt added, suggesting that a domestic replacement for the European Investment Bank with an “explicit focus on infrastructure” could also play a major financing role.
Armitt also suggested bringing forward energy efficiency retrofitting and further R&D investment to accelerate decarbonisaton of energy sources.
"The economy runs on confidence, and government has a critical role to play in instilling this among investors, businesses and consumers.
“The Commission stands ready to offer advice to government on infrastructure’s role in the economic recovery,” Armitt added.
The NIC published its National Infrastructure Assessment in July 2018, a document Armitt references within the letter as a number of the points raised were already included within the assessment.
The government is due to respond to the assessment with a formal National Infrastructure Strategy this year.
The NIC released its annual report in February, highlighting flexibility as a key area where progress had been made by the government, but stated a "clear level" of ambition was needed for further flexibility commitments.