Should the CfD include non-price factors? DESNZ asks for evidence

The Department for Energy Security and Net Zero is consulting on whether to refine its key renewable energy support mechanism, contracts for difference (CfDs), to reflect the “wider benefits of renewable energy”.
CfDs give developers price certainty for their offtake and allocation by auction has driven down prices for consumers. But the industry has complained that prices are now too low to be sustainable. DESNZ is looking at ways of amending the Contracts for Difference (CfD) scheme to address specific challenges facing the renewable energy industry. The consultation is alongside work on long-term market arrangements through the Review of Electricity Market Arrangements (REMA).
DESNZ says that in the supply chain, “low margins and a tough economic environment are making it more challenging for industry to support longer term investments, for example in skills, innovation, or wider system flexibility and operability”. There is a risk of deployment challenges and bottlenecks.
It is considering using non-price factors in the CfD allocation so applicants would have to balance overall costs with factors such as sustainability, addressing skills gaps, and enabling system flexibility and operability.
The Call for Evidence covers both the factors that might be introduced and enforced in the CfD, and how the auction process might change to accommodate the new factors.

The Call for Evidence closes on 22 May. Download it here

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