Energy UK: Government must tweak energy auctions

The industry organisation suggests changes are needed to “not only keep up the pace of decarbonisation in future but go further and faster”

Pathway to COP26 report

Energy UK has set out a number of ways in which the Contracts for Difference (CfD) and Capacity Market auctions can bring even greater benefits for consumers and the economy.

The organisation, which represents more than 100 suppliers and generators, says by reducing costs and incentivising investment, auctions have driven growth in low carbon technologies and established the UK as a leading player in the sector.

However, it says the two key parts of the Electricity Market Reform (EMR) programme must be tweaked by the government to ensure they remain fit for purpose in the future.

It says CfD revenues should be adjusted to reflect substantial cost reductions in a number of low carbon technologies, as well as suggesting the timing and rules for future auctions should be clarified in advance to help generators develop supply chains and plan investments.

Energy UK believes the Capacity Market should allow renewables to participate in future and suggests more investigation is needed into the role hybrid energy facilities can play.

It also suggests rules and governance such as penalties and fees should be reviewed to ensure they remain fit for purpose.

Lawrence Slade, CEO of Energy UK, said: “EMR has been a success story and shows that with the right framework and incentives, low carbon energy can be delivered at an ever-reducing cost to customers, whilst ensuring we keep the lights on.

“However it is essential that we not only keep up the pace of decarbonisation in future but go further and faster. That’s why we are making recommendations which can make EMR deliver even more effectively in future.”

A BEIS spokesperson said: “Thanks to our policies, the UK enjoys a secure and dependable energy supply. We are taking decisive action to keep energy bills as low as possible and with 30% of our electricity supply currently coming from renewable sources, our energy is increasingly clean and green.”

Latest Podcast