Referral of the proposed subsidy to EP Lynemouth Power Limited by the Department for Energy Security and Net Zero
The Subsidy Advice Unit (SAU) has accepted a request for a report providing advice to the Department for Energy Security and Net Zero (DESNZ) concerning its proposed subsidy to EP Lynemouth Power Limited.
Administrative timetable
| Date | Action |
|---|---|
| 29 May 2026 | SAU’s report to be published |
| 29 April 2026 | Deadline for receipt of any third-party submissions |
| 16 April 2026 | Beginning of reporting period |
Request from DESNZ
16 April 2026: The SAU has accepted a request for a report from DESNZ concerning the proposed subsidy to EP Lynemouth Power Limited. This request relates to a Subsidy of Particular Interest.
The SAU will prepare a report, which will provide an evaluation of DESNZ’s assessment of whether the subsidy complies with the subsidy control requirements (Assessment of Compliance). The SAU will complete its report within 30 working days.
Information about the subsidy provided by DESNZ
Biomass generation is a significant and reliable contributor to the UK’s energy mix. Large-scale biomass plants, converted from coal, can provide dispatchable power and currently contribute around 6% of UK electricity generation. Current government support for these plants ends in 2027. At this point, we do not anticipate that there would be sufficient incentive for these generators to continue operating without subsidy.
In 2024, a consultation was held on whether transitional support should be provided for large scale biomass generators. After careful consideration of the responses, the government believes there is a case for a short-term support mechanism for large-scale biomass generators. This decision recognises that the continued operation of these plants plays an important role in bolstering our security of supply in the late 2020s and early 2030s by providing low-carbon, dispatchable electricity to the grid.
During the consultation all parties who felt that they met the eligibility criteria for support were invited to come forward with evidence. Government also outlined that any decision to provide support would be subject to agreeing a deal that represents value for money for consumers, satisfactory completion of sustainability and eligibility checks, and completion of a subsidy control assessment. In February 2026, the government agreed Heads of Terms for a Low Carbon Dispatchable Contract for Difference (LCD CfD) with EP Lynemouth Power Limited (Lynemouth).
CfDs are government’s established mechanism for ensuring capacity adequacy and incentivise investment in all forms of low carbon generation technologies. The generator sells the electricity into the market at a variable market price. If the reference (baseload) market price falls below the agreed strike price, then the generator receives a top-up payment equal to the difference between the strike price and the market price. When the market price exceeds the agreed strike price, the generator pays back the difference.
The proposed LCD CfD arrangement with Lynemouth will be limited to a duration of 4 years (1 April 2027 to 31 March 2031). Importantly, it will include a generation collar with a cap for the load factor eligible for subsidies set at 27%, representing a significant reduction compared to existing support. This means Lynemouth will only be supported to generate power when the system and consumers really need it. When intermittent renewables are abundant, Lynemouth won’t generate, and consumers will benefit from cheaper wind and solar instead. The proposed short-term arrangement will secure reliable power at a strike price of £110MWh (2012 prices).
We estimate the total value of the proposed subsidy to be around £260 million per year (2023 to 2024 prices and subject to market changes). We estimate this to be comparable to, or marginally cheaper than, securing alternative capacity through the Capacity Market.
The proposed arrangement (which will be subject to a final decision by the Secretary of State) will also include an Excess Returns Mechanism, requiring a payment to be made to the Low Carbon Contracts Company (LCCC) if Lynemouth’s returns exceed certain thresholds.
Information for third parties
If you wish to comment on matters relevant to the SAU’s evaluation of the Assessment of Compliance concerning the proposed subsidy to EP Lynemouth Power Limited, please send your comments on the date stipulated in the timetable above. For guidance on representations relevant to the Assessment of Compliance, see the section on reporting period and transparency in the Operation of the subsidy control functions of the Subsidy Advice Unit.
Please send your submissions to us at sau-eplynemouthpower2026@cma.gov.uk. copying the public authority: biomasselectricitycorrespondence@energysecurity.gov.uk.
Please also provide a contact address and explain in what capacity you are making the submission (for example, as an individual or a representative of a business or organisation).
Notes to third parties wishing to make a submission
The SAU will only take your submission into account if it can be shared with DESNZ. The SAU will send a copy of your submission to DESNZ together with its report. This is to allow the public authority to take account of the submission in its decision as to whether to grant or modify the subsidy or its assessment. We therefore ask that you provide express consent for your full and unredacted submission to be shared. We also encourage you to share your submission directly with DESNZ using the email address provided above.
The SAU may use the information you provide in its published report. Therefore, you should indicate in your submission whether any specified parts of it are commercially confidential. If the SAU wishes to refer in its published report to material identified as confidential, it will contact you in advance.
For further details on confidentiality of third party submissions, see identifying confidential information in the Operation of the subsidy control functions of the Subsidy Advice Unit.
Contacts
- SAU project team: sau-eplynemouthpower2026@cma.gov.uk
For media enquiries, contact the CMA press office.
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