Contracts for Difference (Miscellaneous Amendments) Regulations 2021

Lord Grantchester Excerpts

Thursday 10th June 2021 Grand Committee

[Lord Grantchester (Lab)]

Once again, I thank the Minister for his explanation of the regulations before the Committee today. They amend a number of regulations covering contracts for difference, as well as the general regulations for electricity market reform.

The aforementioned contracts for difference cover the definition of eligible generator by removing biomass as a qualifying generation to apply for a CFD. I welcome this change, as biomass has largely fulfilled its purpose of replacing coal-fired power stations with renewable energy fuel. Now that electricity generation has become less carbon intensive, continued supply of woodchip has caused controversial activity to be reassessed.

In relation to contracts for difference regulations, these regulations also amend the allocation regulations by including floating offshore wind as eligible to apply for CfD funding. Through the consultation process, other minor improvements and better drafting to aid clarity have also been identified, such as supply chain plans and period definitions to application rounds to provide better certainty to applicants. Thus these regulations bring many improvements and developments to the CfD process. As an initiative to incentivise investment in low-carbon electricity generation and bring forward renewable sources of energy while improving affordability for consumers and maintaining energy security during energy market reform, the CfD regime has been largely a huge success. While there has been controversy over the setting of strike prices for specific technologies, the mass deployment of renewables has led to more competitive renewable generation and better energy efficiency. The consultation process has been very productive and the resulting redrafting of guidance is also very welcome. Can the Minister give any indication of when National Grid and the Low Carbon Contracts Company will publish their updates to reflect these changes? In turn, the Minister’s department intends to publish an updated version of its supply chain plan guidance. Will the Minister commit to publishing it well in advance of the next CfD allocation round?

Floating offshore wind is an interesting development that the Government have identified as potentially a very productive new source of energy generation. Will the Minister expand a bit on the operation of pot 2 as a separate budget for less-established technologies to which floating offshore wind will have to apply? What is the size of this pot in relation to the more recognised pot to which established technologies would apply? What have been the relative awards total between the two pots in the past and what is the breakdown of those awards? I will be happy to receive a letter with more detailed information from the Minister rather than take up the Committee’s time now. I merely wish to understand how new technologies are supported in relation to the generality of technologies and when a new technology will graduate, and by what defining characteristics, from one pot to another. Can the Minister say in any meaningful way at the moment what strike price might be awarded to offshore floating wind in relation to strike prices for the various stages of conventional fixed offshore wind? With that, I approve the regulations before the Committee.