Wind industry welcomes new plan for cheaper electricity bills

The proposals would allow wind and other renewable projects supported by the Renewables Obligation to opt for new long-term, fixed price contracts. Under the RO, which closed to new renewables projects in 2017, generators trade their power on the market and receive a fixed amount of subsidy to cover the investment cost of more expensive older renewables.

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.

In 2020/21, Renewables Obligation generators produced over 80 terawatt hours (TWh) of electricity, or about 25% of the UK’s electricity. As most power generated under the RO is sold a year or more in advance, generators under the scheme are not directly receiving prices reflecting wholesale costs. 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 wants to work with Ministers to move forward with detailed design of a scheme to be implemented in the new year.

The proposed new contracts would build on the success of the flagship Contracts for Difference scheme which has procured large amounts of cheap renewable capacity which generate power at fixed prices and any revenue above the fixed price is paid back to consumers. The prices secured under the CfD are so low that these projects are expected to pay back over £3bn this winter.

RenewableUK's CEO 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 This proposal is a step forward towards breaking that outdated link.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".