The UK Government has concluded its consultation on maintaining growth in renewable deployment to meet net zero.
The Department for Business, Energy & Industrial Strategy (BEIS) call for evidence centred on understanding how a range of policies supporting the deployment of renewable technology should adapt over the next decade, while ensuring overall system costs are minimised for electricity consumers and supporting and adapting to innovative technologies and business models.
The BEIS response provides a summary of the views received which will inform its approach to the long-term future of renewable support and the future design of the Contracts for Difference (CfD) scheme.
Three approaches were commonly mentioned by respondents as alternative routes to market outside of the CfD.
These were corporate power purchase agreements (PPAs), utility PPAs and trading openly on the wholesale market.
The majority of respondents noted the “merchant” market/CPPAs for renewables is growing, but still limited in size.
Reasons for this included a lack of corporate appetite for CPPAs, a lack of credit worthy offtakers, short-term contracts and lower revenue returns for renewable projects.
Respondents noted that this results in higher costs for project financing given the lack of long-term revenue stability.
Similarly, respondents mostly considered that in its current form the wholesale market is not a sufficient route to market and results in similar project finance challenges given the price volatility and increasing occurrences of price cannibalisation.
However, respondents felt the wholesale market should still be considered as an additional route for renewable deployment, and the Government should look to expand, incentivise and encourage such routes.
Responses did note that past decisions to exclude onshore wind and solar from CfD auctions forced projects to find other routes to market.
Finally, responses commonly referenced the Capacity Market (or other balancing/ancillary services), storage, hydrogen, and demand side response as other potential routes to secure additional revenue streams.
The UK Government stated the responses to its call for evidence has “crystalised” its view that longer term changes for renewables will need to be considered holistically as part of a wider approach to the electricity market.
To remain on track to deliver the deployment and energy system required for CB6 and net zero, in the most efficient way, alongside this response the UK Government is also publishing the Capacity Market call for evidence “seeking views on improving assurance that capacity will deliver when required, and how to better align with decarbonisation of the power sector, such as enhancing participation of low carbon power”.