The UK government will offer voluntary long-term fixed-price deals to electricity generators not already operating under the Contracts for Difference scheme as it looks to get a grip on escalating electricity bills.
The Wholesale Contract for Difference (WCfD) mechanism will offer renewables operators the option to accept a fixed price for the electricity they generate in exchange for giving up forward wholesale revenues.
The scheme will be launched later this year with a view to running an allocation process in 2027.
The measures will “reduce the share of electricity exposed to gas price shocks and provide generators the economic incentive to move on to fixed contracts not linked to volatile gas”, according to energy department DESNZ.
It said that around 30% of the UK’s renewable energy fleet could be in line for the WCfD, with assets operating under the legacy Renewables Obligation scheme able to exchange their wholesale revenues for a fixed price CfD.
London is also increasing the Electricity Generators Levy (EGL) from the current rate of 45% to 55%, to “ensure an increased proportion of the extraordinary revenues generated when the gas price spikes is available to government to support businesses and households with the impacts of the conflict in the Middle East on the cost of living”.
UK Energy Secretary Ed Miliband (pictured) said: “As we face the second fossil fuel shock in less than five years, the lesson for our country is clear: The era of fossil fuel security is over, and the era of clean energy security must come of age.
“That’s why we’re doubling down on clean power, to give our country energy security and bring down bills for good.”
UK Prime Minister Kier Starmer added: “We need to get off the fossil fuel rollercoaster – this will make energy bills more stable and take the pressure off family budgets.
“When global gas prices spike, people here shouldn’t be picking up the tab. Our focus is simple: easing pressure on household budgets now, while building a homegrown energy system that protects families from global instability in the years ahead.”
UK Chancellor Rachel Reeves said: “Hardworking British families and businesses should not bear the brunt of global gas price shocks while electricity generators are making exceptional profits.
“Alongside moving generators onto the competitive pricing assured through wholesale Contracts for Difference, increasing the EGL to 55% will help to break the link between high gas prices and high electricity prices – offering households and businesses stronger protection against future energy shocks.”