Renewables industry asked to shape financial support under EMR

Its call for evidence (31-page / 561KB PDF) is open for response until 3 December and is intended to help the Government develop 'strike prices' under a new system of feed in tariffs with contracts for difference (CfDs). It is proposed that the System Operator part of National Grid deliver the new CfDs once the Government's flagship Electricity Market Reform (EMR) programme takes effect.

The Government announced in May that data from the most recent RO Banding Review will be used to administer the setting of initial strike prices with adjustments made "where necessary" to reflect the different nature of the scheme. This additional call for evidence is "specifically to ensure" that National Grid takes into account "the most recent and relevant technology costs and economic assumptions" when setting the strike prices. It is also seeking views to help it "understand the differences in investment decisions under the [RO] and CfD, and how choices will be made between the two mechanisms" while the two schemes run side by side.

National Grid will provide an analysis of the evidence it receives to the Government in spring 2013. These findings will be used by the Government to help it create its first EMR delivery plan, which will be published later next year.

The Department of Energy and Climate Change (DECC) is currently carrying out a further call for evidence on onshore wind. The results of this exercise may also inform the National Grid's work on CfDs, it said.

Anaerobic digestion, hydro, wind and small solar photovoltaic installations are excluded from the National Grid questionnaire. It is specifically seeking new data on offshore wind developments at an average water depth of greater than 45m or which are further than 50km from shore which are likely to be commissioned from 2016/17 onwards.

The Government has claimed that EMR, which will be implemented through its draft Energy Bill (307-page / 1.9MB PDF), will bring about the widest reforms of the electricity market since privatisation.

EMR proposes a new system of financial incentives designed to ensure that low-carbon forms of electricity generation can compete fairly in the marketplace, backed with a capacity market aimed at ensuring that consumers continue to benefit from reliable electricity supplies at an affordable cost. Around one fifth of the UK's existing power generating capacity is due to come off line over the next decade due to ageing power plants and more stringent environmental standards, while an increasing amount of the country's power will be generated from intermittent sources such as wind.

The new CfDs will offer producers of low carbon power, to include nuclear as well as renewable energy sources, a fixed price for energy supplied to the National Grid. They will be set up between energy providers and the National Grid, acting as an independent 'system operator', with payments made by reference to a technology-dependent 'strike price' and a market reference price. As well as incentivising low carbon generators, CfDs will protect consumers by "clawing back" money from generators if the market price is higher than the strike price.

The draft Bill will apply in Scotland and Wales as well as England, with some of its provisions extended to Northern Ireland. It is expected to receive Royal Assent in 2013 so that the first low-carbon projects can be supported in 2014. Initial strike prices are also due to be published next year.