Renewable and nuclear generators will move onto contracts for difference (CfD) so that electricity prices are no longer set by the marginal price of gas, Liz Truss, the UK’s new prime minister, said today.
This is part of Truss’ plan to tackle soaring energy prices that includes an Energy Price Guarantee, which will cap energy bills for a typical UK household at an average of GBP 2,500 (USD 2,888/EUR 2,885) a year for the next two years. There will also be support for businesses, charities and public sector organisations.
To reduce the cost of this intervention, the government plans to ramp up supply. A new energy supply taskforce, led by Madelaine McTernan who headed up the UK’s vaccine taskforce, has started negotiations with domestic and international suppliers to agree on long-term contracts that reduce energy prices. The taskforce and the Department for Business, Energy and Industrial Strategy will negotiate with renewable producers to reduce their prices as well, according to a government statement.
The UK will also be accelerating all sources of domestic energy, including North Sea oil and gas production.
“And we will speed up our deployment of all clean and renewable technologies including hydrogen, solar, carbon capture and storage, and wind… where we are already the world leader in offshore generation,” Truss said.
The government wants to make the UK an energy exporter by 2040.
There will also be a liquidity scheme of up to GBP 40 billion for firms operating in wholesale energy markets.
The government will also be launching a review of energy regulation and a review to ensure the UK reaches net zero by 2050 in a way that is pro-business and pro-growth.
Industry group RenewableUK recently expressed support for new fixed price contracts for older wind and renewable generation sources.
Today, its chief executive Dan McGrail said: “We’re already working closely with Ministers and our member companies on proposals to break the link between the unaffordable cost of gas and the price of electricity. Renewable projects which have gone live since 2015 are already on these ultra-low cost contracts which actually pay money back to consumers. A new scheme would see older renewable energy projects moving onto new fixed-price contracts, and this would be open to include as many generators as possible."
“Although the Prime Minister’s announcements set out various measures, we’re confident that accelerating renewables will prove to be the only scalable solution which delivers meaningful and sustainable savings for billpayers and helps UK be a net energy exporter,” he also commented.
(GBP 1 = USD 1.155/EUR 1.154)
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