REPOWER – REA OVERVIEW REQ


ROC O


n 31 March 2017 the Renewables Obligation will close to new applications, 15 years after it first opened. 15 years is a long


time in energy policy. Renewable electricity companies have become very used to the RO, and whilst “love” might be too strong a word, it is certainly bankable. Now they’re entering a new and unknown policy world, with a new scheme called Contracts for Difference replacing the RO. As we write this, DECC is accepting the first CfD applications. Later this winter, developers will find out if their bids have been successful.


10 REQ RENEWABLE ENERGY QUARTERLY | | WINTER 2014


AND A HARD PLACE BETWEEN A


The REA is working hard to ensure that all players in renewable power can benefit from the new CfD scheme


If it ain’t broke, why fix it? Indeed. The Government has two main reasons. Firstly, the economic downturn has made governments across Europe much more alert to cost-effectiveness in green policies. The UK, under the Chancellor’s austerity drive, has led the charge. CfDs will reduce costs, in theory, because


payments to generators reduce as energy prices increase. If reference prices go up above strike prices, generators will have to pay money back. Most analysts do expect prices to continue to increase, despite the advent of American shale gas flooding the EU with cheap coal that the USA no longer uses.


CfDs will also drive competition because onshore wind, solar, hydro and conventional waste technologies will have to compete with each other for contracts in an auction where the cheapest bids win. Offshore wind, marine renewables, biomass CHP, geothermal, biogas and other advanced waste technologies will also have to compete if applications are over-subscribed, which is likely. Secondly, Government wants to move


towards a “technology-neutral” approach. In other words, they want to support nuclear and carbon capture and storage. The first nuclear CfD (Hinkley Point C) has been decided by closed-door negotiation


www.r-e-a.net


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