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Action to help independent renewable generators to gain entry to the electricity market
The government will take additional action to help independent renewable generators gain entry to the electricity market, in order to promote competition and innovation, Greg Barker announced today.
An amendment has been tabled to the Energy Bill that will make it easier for independent generators of renewable electricity to sell their power to suppliers via Power Purchase Agreements, thereby improving their access to market.
Energy Minister, Greg Barker said:
“The Coalition is committed to driving much greater plurality, innovation and competition in the electricity market.
“Our new reforms will create the framework for a far more dynamic and entrepreneurial market, while still ensuring that we get the large scale investment that industry needs.
“Opening up the electricity market to more competition is a fundamental part of the reforms we are introducing through the Energy Bill.
“It will also allow new smaller players to gain a greater share of the exciting renewable electricity market.”
Independent generators do not usually have a strong supply arm that sells electricity direct to consumers and have been finding it hard to enter the market which is dominated by the ‘Big 6’ vertically integrated energy companies.
They play an important role in helping to meet the country’s renewable energy targets, account for a significant chunk of the new energy infrastructure projects that are awaiting final investment decisions, and also introduce innovation and competition into the market.
The amendment would enable the government to establish a scheme obliging suppliers to buy electricity from renewable generators under specified conditions if they were unable to agree a commercial contract. It would be used as a last resort, to strengthen routes to market and stimulate competition.
Notes for Editors
- The government has tabled amendments to the Energy Bill to enable the creation of an off-taker of last resort. These amendments essentially provide a ‘back-stop’ power, providing greater certainty for renewable generators and investors: http://services.parliament.uk/bills/2013-14/energy/documents.html
- Detailed proposals for the off-taker mechanism will be developed and consulted on later this year. An extensive stakeholder engagement process will ensure that final proposals are supported by industry.
- The term independent generators applies to any generator that is not vertically integrated through the supply chain ie does not have a significant supply arm that sells electricity to consumers. Independent generators often sell their power to suppliers via power purchase agreements and this is how they gain a route to market. The definition can cover a range of technologies and sizes.
- More detail on DECC’s route to market work, including a basic proposal for the off-taker of last resort can be found on the GOV.UK website
- The government has also recently launched a CfD Market Readiness project to help independent developers prepare for the introduction of CfDs. It consists of working groups comprised of industry representatives and aims to develop workable products that will reduce costs for first movers and set out best practice for the PPA market. More information can be found at: https://www.gov.uk/government/policy-advisory-groups/electricity-market-reform-emr-cfd-market-readiness-working-groups