Solar Energy UK and some of its largest member companies are backing proposals for new fixed price contracts for older sources of renewable power.
Solar Energy UK chief executive Chris Hewett said: “We have begun considering the proposals to reform support for renewable power, which we will need to be sure will function as intended to both support the sector and combat the rising cost of living.
“There is much to be worked through on the detail, but senior industry players are very supportive of the principle. Continuing to let natural gas set the price of power is not in the interests of the country.
“Clearly expansion of renewables such as solar is the solution to low-cost generation, energy security and reaching net zero. We are ready to discuss with new ministers as soon as they take office.”
RenewableUK has backed UK government proposals to develop new fixed price contracts for older wind and renewable generation.
The trade body said the measures if implemented will allow wind and other renewable projects supported by the Renewables Obligation to opt for new long-term, fixed price contracts.
The new scheme would see the market power price – which is set by gas – replaced by a fixed price contract.
“This would ensure that the long-term costs of keeping these renewables running would be met, but consumers would be shielded from market prices set by expensive gas,” said R-UK.
“The proposal for new contracts would reduce the risk of rising costs as future trading arrangements expire and gas prices continue to skyrocket. This approach, originally put forward by the UK Energy Research Centre, has also been backed by Energy UK, and industry is wants to work with Ministers to move forward with detailed design of a scheme to be implemented in the new year.”
The UK government plan, first revealed by Bloomberg, would mean operators would be locked into set deals and would not be able to take advantage of soaring market prices.
Business Secretary Kwasi Kwarteng is said to be working to extend the Contracts for Difference regime to existing generators, according to Bloomberg, which cited people familiar with the discussions.
Currently, CfDs can only be entered by permitted but unbuilt renewables projects which hold grid connection offers.
RenewableUK’ boss Dan McGrail said: “We’ve been discussing these proposals with our member companies in detail to ensure that the changes are designed in the right way and are fully deliverable, so that we can maximise savings for bill payers.
“We’re keen to work collaboratively with the Government and a wide range of other organisations to explore how we can put a new scheme in place in an expedient way. The proposals put forward so far have widespread support among our members and further discussions are taking place.
“It makes no sense to allow the exorbitantly expensive cost of gas to set the price for the whole of the electricity market. This proposal is a step forward towards breaking that outdated link. It will enable billpayers to benefit more from the vast amounts of low-cost electricity being generated by wind and other renewables, which are our cheapest new power sources”.
Energy Department BEIS said: “The civil service is making the appropriate preparations in order to ensure that any additional support or commitments on cost of living can be delivered as quickly as possible when the new Prime Minister is in place.”
A source added that there are ongoing discussions with industry on what more can be done to ensure markets function effectively for consumers in the face of rising gas prices.
Energy UK’s deputy director Adam Berman added: “The current energy market doesn’t allow customers to fully benefit from the cheapest form of electricity – domestically produced low-carbon generation.
“This proposal could reduce bills by up to £18bn per annum, delivering much needed cuts to bills for both households and business customers.
“By giving generators the chance to secure a longer term agreement with lower returns in place of selling electricity at wholesale market prices, this scheme would be a significant first step to decoupling gas from retail electricity prices.
“Removing the link between gas and retail electricity prices will be complex and take time, but this solution provides a quick fix for up to 40% of our generation capacity.
“Much will depend on the details of the scheme, but with gas prices likely to remain high for some time, we are confident that it can deliver significant savings for customers next year.”