PPA fears prompt government call for evidence
Fears that power purchase problems are starting to prevent independent renewable generators from playing their part in the UK's energy mix has prompted the Government to issue a call for evidence to address market barriers.
DECC say that before independent generators can raise debt, to begin new projects, they need to have long-term contracts in place, guaranteeing that someone will purchase the power they produce.
Some independents, however, are reporting a recent decline in the terms they’re being offered for Power Purchase Agreements (PPAs), potentially blocking further investment in renewables.
The call for evidence, which runs until Aug 16, is described as an opportunity to find out what’s actually happening so that appropriate action can be taken. It’s stressed that nothing has been decided at this stage, not even whether or not intervention will be welcome or necessary to correct the PPA problem.
However, DECC also warn that £110bn of investment in low-carbon forms of power generation will be needed over the next decade to “keep the lights on, meet climate targets and make consumer bills more affordable”.
The point is then made that the Government wants a diverse electricity market to develop, with reduced barriers for new entrants, and independent developers playing an important part in the industry.
The 20-page call for evidence includes a number of possible initial and high-level options, including the introduction of voluntary market-led initiatives, competition measures or direct regulatory interventions.
“These options have been included to stimulate discussion and provoke thinking,” it’s stated. “They are not intended to be definitive and market participants may have alternative proposals. It is also possible that one intervention could be used in combination with another.”
The Government’s starting principle, as also stated in the call document, is that intervention should always be minimised and limited to responses that are proportionate, targeted and delivering benefits that outweigh the costs.
As such, any intervention should be expected to be time-limited and geared to enable a smooth transition to an eventual market-based solution.
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