Professor Dieter Helm, a key energy policy advisor to the UK government, has poured cold water on renewable industry calls for the introduction of so-called subsidy-free Contracts for Difference (CfD) auctions for onshore wind.
Addressing a BEIS select committee evidence session on his independent review on the cost of energy, Helm said onshore wind should be supported via capacity contracts under an “equivalent firm power” (EFP) capacity auction.
An EFP auction would see renewables bid for capacity contracts in a similar way to the existing capacity market but it would also include the cost of grid balancing from each unit.
“The CfD is written against the wholesale price and as more zero marginal cost stuff comes into the system the wholesale price becomes less relevant as a benchmark for it.
“The objection to the CfD is not there should be a contract, it’s that the contract form should be essentially a capacity contract rather than an energy contract,” he said.
Helm argued his proposals would minimise the cost to consumers of balancing intermittent sources of energy.
RenewablesUK executive director Emma Pinchbeck told the committee that competitive CfD auctions for onshore wind are “the best way to lock in low-cost energy for consumers”.
“It’s extraordinary that onshore wind isn’t allowed to compete for CfDs. It’s important to back the government in taking another look at onshore wind and start running a pot 1 auction that would deliver onshore wind at under £50 per megawatt-hour – cheaper than gas,” she added.
Image: Dieter Helm (BEIS)
Helm scorns subsidy-free CfDs
By EBS