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UK looks to shock energy sector with major reform

The UK Government is considering reforms to the Contracts for Difference (CfD) scheme, which provides support for low carbon electricity projects, such as offshore wind and solar.

The proposed changes would reward applicants for including “non-price factors”, such as supply chain sustainability, skills gaps and innovation, in their bids.

The aim is to encourage investment in the renewable energy sector and improve the country’s energy security.

The reforms are part of the government’s plans to create a more secure energy future and support green industries and high-quality jobs.

The government will launch a consultation on more detailed proposals if the changes are deemed effective.

The Minister of State for Energy Security and Net Zero, Graham Stuart, has lauded the success of the CfD scheme in supporting low carbon electricity generation in Britain while simultaneously driving down costs for consumers.

In a bid to further enhance the scheme’s efficacy and maximise its potential, Stuart has suggested introducing non-price factors, which will boost energy security and encourage renewable energy developers to invest in supply chains and innovation, leading to a stronger sector and bolstering the country’s economy.

Stuart believes this reform will facilitate the growth of the renewable energy supply chain, thereby accelerating the energy transition plans to power more of Britain from within.

Former Offshore Wind Champion, Tim Pick, has voiced his support for the government’s Call for Evidence. Pick highlights the need for a more nuanced approach to the CfD programme, which has successfully driven innovation and lowered costs, but is now in need of development to create new supply chains and jobs in the low carbon industry.

Meanwhile, Energy UK’s Deputy Director for Advocacy, Adam Berman, recognises the crucial role played by the CfD programme in cementing the UK’s position as a global leader in low carbon technologies.

However, Berman points out that inflation, commodity price increases, and international competition necessitate continued efforts to attract investment in the UK’s net zero and energy security goals.

In response to today’s announcement, Ana Musat, RenewableUK’s Executive Director of Policy, commented on the importance of designing the right framework for CfDs to attract billions of pounds of private investment.

According to Musat, it is essential to build more clean energy projects faster, especially when international competition for capital and expertise is at an all-time high.

She emphasised that awarding CfDs shouldn’t be solely based on a race to the bottom on prices. Instead, a sustainable approach should be adopted to support long-term industrial growth, innovation and supply chain development.

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