The CBI has urged the government to provide a longer-term view of its plans for future renewables subsidy auctions.
The auctions award, to renewables generators, contracts that pay the difference between the “strike price” – a price for electricity reflecting the cost of investing in a particular technology – and the “reference price”– a measure of the average market price for electricity in the GB market. The auctions are intended to give greater certainty and stability of revenues to electricity generators than the previous policy mechanism, the Renewables Obligation, by reducing their exposure to volatile wholesale prices, whilst also protecting consumers from paying for higher support costs when electricity prices are high. Two more auctions are expected before 2020, with the next one timetabled for this April.
In its submission to the government ahead of next month’s budget, the CBI said that setting out plans for the timing and expenditure of the auctions at least four years in advance would enable stability in, and the control of, future costs. This would market a departure from the present policy, where firm plans for the auctions are only known a few months in advance.
The submission further said the government must confirm its future renewables spending beyond 2020, as this would allow firms to plan for long-term investments when the current spending period ended. The government was also advised to publish an annual report on the cost impact of all energy and climate policies.