UK Gov working to ‘break link’ between renewables and gas prices

Work is ongoing to “break the link” between the cost of gas and electricity prices in the UK, the prime minister has confirmed.

Liz Truss says discussions are taking place between Westminster and renewables generators with a view to moving them on to Contracts for Difference (CfD).

Doing so would guarantee a fixed price for green energy, meaning it would no longer be set by the price of gas.

Projects that started up after 2015 are already on the “ultra-low cost contracts”, the UK Government’s main mechanism for bringing down the cost of renewables.

As it stands, older developments are free to sell their power on the open market, meaning they are tied to the price of gas.

Decoupling the two will make a tangible difference to the bills of UK households by reducing the cost of electricity, according to experts.

While delivering her energy strategy in parliament earlier, Ms Truss said: “We will speed up our deployments of all clean and renewable technologies, including hydrogen, solar, carbon capture and storage, and wind, where we are already a world leader in offshore generation.

“Renewable and nuclear generators will move on to Contracts for Difference to end the situation where electricity prices are set by the marginal price of gas.

“This will mean that generators are receiving a fair price reflecting their cost of production. Further bringing down the cost of this intervention.”

In a move designed to stop millions from falling into fuel poverty, Ms Truss revealed on Thursday that energy bills for the average household would be frozen at no more than £2,500.

Businesses will also be spared damaging increases under the two-year plan, which will cost tens of billions of pounds.

Chief executive of trade body RenewableUK, Dan McGrail praised Ms Truss for her pledge to scale up green energy.

© Supplied by RenewableUK

He said: “Everyone will benefit from the new Prime Minister’s clear commitment to speed up the roll-out of renewables. Liz Truss has sent a clear signal that delivering cheap clean power for billpayers as fast as possible is at the heart of Government’s energy strategy and the renewable energy sector is ready to meet that challenge.

“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.

“The review announced by the Prime Minister on how to reach Net Zero in a way which maximises growth creates a golden opportunity to ensure that we build up our renewable energy supply chains throughout the UK, boosting jobs and investment in our new green economy.”