Energy Bill draft strike prices published earlier than expected

The Government has today set out strike price support levels for renewable technologies under the new support mechanism, the Contracts-for-Difference (CfDs) model, which will aim to help renewables contribute more than 30% of total power by 2020.

Announced earlier than expected, the Department for Energy and Climate Change (DECC) said that the strike prices aim to make the UK market one of the most attractive for developers of wind, wave, tidal, solar and other renewables technologies, whilst minimising the costs to consumers.

DECC said that these prices are broadly comparable to the support levels available under the Renewables Obligation (RO).

Delivering a strike price of £100 per mega watt hours (MWh) to onshore wind projects up to 2016/17, the price will then fall to £95/MWh for the next two years, while the strike price for offshore wind projects will stand at £155/MWh in 2014/15, dropping to £135/MWh in 2018/19.

DECC has also proposed a £105/MWh strike price for biomass conversion and £95/MWh for hydro, with both remaining unchanged up to 2018/19. Solar projects will stand at £125/MWh, falling to £110/MWh in 2018/19.

REA chief executive Gaynor Hartnell said: “Given that a cap has been imposed for dedicated biomass under the Renewables Obligation, it is particularly important to get clarity on the Government’s intentions for this technology under the CfD regime.

“There are hundreds of megawatts of biomass projects looking to commission under the new support regime and their contribution of clean, baseload electricity will help keep the lights on when the capacity crunch comes.

“Biomass has been a mainstay of renewable energy policy since the mid-1990s and over the last few months biomass projects have been encouraged to apply for CfDs. It would be inconceivable and nonsensical for Government to turn its back on this technology.”

The Government estimates that the strike prices will enable the UK to meet its 15% of energy from renewable sources target by 2020.

According to DECC, the proposals will also deliver between 8 giga watts (GW) and 16GW of offshore wind capacity, 9GW to 12GW of onshore wind capacity, 2.4 to 3.2GW of solar farms, around 1.7GW of hydro capacity and between 1.2GW and 4GW of new biomass conversion capacity.

Secretary of State Edward Davey said: “This will help boost home-grown sources of clean secure energy, and enable us to decarbonise the power sector, with renewables contributing more than 30% to our mix by the end of this decade.

“Our reforms will keep the lights on and emissions down, and will save consumers money on their bills. The result – low-carbon, affordable and reliable power for the long-term,” he added.

The support for the strike prices comes from the £7.6bn Levy Control Framework, as previously announced.

According to DECC, strike prices effectively remove price volatility risk for electricity generated from low-carbon sources, under new long-term CfDs being established by the Energy Bill. “This ensures greater certainty to generators and therefore a better deal to consumers,” added DECC.

The strike prices form a “core component” of the Government’s strategy to bring forward investment in affordable low-carbon electricity generation – including renewables, Carbon Capture and Storage and new nuclear.

Commenting on the development of the Energy Bill and the Government’s reforms, Davey said: “No other sector is equal in scale to the British power market, in terms of the opportunity that it offers to investors, and the scale of the infrastructure challenge”.

Davey added that the reforms will attract up to £110bn investment in a mix of “clean, secure power and demand reduction”, and will support up to 250,000 jobs up and down the supply-chain.

“The Energy Bill is already progressing well through Parliament and received overwhelming cross-party backing at Commons Third Reading,” he said.

“Developers and investors have been crying out for more details, sooner, and that is what we are giving them today,” said Davey.

Leigh Stringer

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