UK publishes detail draft of low-carbon energy generation contract

7 August 2013 (Last Updated August 7th, 2013 18:30)

The UK government has published a detailed draft of the contract aimed at providing policy certainty for investors in low-carbon energy generation.

Michael Fallon

The UK government has published a detailed draft of the contract aimed at providing policy certainty for investors in low-carbon energy generation.

The government is trying to bring a change in the electricity market with the help of the energy bill in order to keep the lights on, decarbonise the economy and minimise costs to consumers.

As part of the changes, a new support mechanism will be introduced through long-term Contracts for Difference, (CfDs) alongside a capacity market.

This is expected to help the country to incentivise up to £110bn of private sector investment to 2020.

According to the government, CfDs are important for low-carbon generation investors as they have to pay the up-front costs of major new energy infrastructure projects.

"The government is trying to bring a change in the electricity market with the help of the energy bill in order to keep the lights on, decarbonise the economy and minimise costs to consumers."

Along with draft terms of the contracts, methodology also has been published, through which contracts will be allocated.

UK Business and Energy Minister Michael Fallon said, "No other sector is equal in scale to the British power market, in terms of the opportunity that it offers to investors, and the scale of the infrastructure challenge.

"The key contract terms have been published in detail to provide the energy sector and investment community with further certainty, so they can get on and invest."

According to the minister, when compared to the existing system of support, the Renewables Obligation, the new support mechanism will make it cheaper to deliver low-carbon generation by around £5bn up to 2030.

"This will put the UK one step ahead in the global race to develop clean technologies, and will support up to 250,000 jobs across the energy sector," Fallon added.

The industry will be able to provide feedback on the draft contract terms over the summer and these views will be considered before the UK Government publishes final terms, which is expected in December 2013.


Image: UK Business and Energy Minister Michael Fallon. Photo: courtesy of the UK Government.

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