Consumer group Which? has argued that the government’s proposed renewable energy subsidy scheme does not offer value for money because offshore wind could be prioritised ahead of cheaper alternatives.
In a letter seen by the Guardian, the organisation says that whilst it supports the move to a green economy it believes that the Contracts for Difference (CfD) subsidy scheme is flawed. A CfD is a long-term contract that helps provide stable and predictable incentives for companies or investors to invest in low-carbon generation.
Richard Lloyd, executive director of Which?, wrote, “It is vital that any measure that adds costs to consumers’ bill is closely scrutinised at a time when energy prices are the top financial concern for consumers. Whilst there has been a lot of welcome attention given to tackling the immediate costs of energy bills, Which? believes that more attention needs to be done to address energy costs in the long term.”
He continued that the CfD regime could lead to expensive generation projects being prioritied over more cost-effective options because of the “absence of full competition from the Contracts for Difference process”.
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Instead a document sent with the letter says that under the current process it is unclear how there would be any price competition for offshore wind.
Which? adds, “In our view it is not appropriate to shield offshore wind developers from competitive cost pressures […] there are a wide range of costs across offshore wind projects but accurate cost information is hard to come by. Allocating subsidy competitively is the best way of revealing this information.”
Eight renewable energy projects given the go-ahead in April will receive one of the government’s CfDs, guaranteeing price for the energy suppliers for a 15-year period. The CfDs aim to ensure that the projects will definitely receive financial support to pay back investment made and further CfDs are expected to be made available later this year.
Last month the Department for Energy and Climate Change confirmed plan to stop subsidies through the renewables obligation scheme for large-scale solar farms. The plan received strong criticism because is means the industry will have to compete with other forms of renewable energy to receive a CfD.
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