Date lodged: 23 October 2018
To ask the Scottish Government how much it expects to receive in Barnett consequentials from the reported £557 million that the UK Government is expected to raise from the auction of renewable energy licences, and how it will allocate this.
Answered by: Paul Wheelhouse 7 November 2018
The UK Government confirmed on 11 th October 2018 that £557 million will be made available for less established renewable technologies to bid for in Contract for Difference (CfD) auctions. Developers will compete for this funding in CfD auctions to be held at regular 2 year intervals between Spring 2019 and 2025.
The CfD is funded through levies on electricity suppliers, and distributed to developers of renewable generators through competitive bids in to the CfD auction. It therefore does not generate any revenue for the UK Government that would then be redistributed via Barnett consequentials.
The CfD mechanism was introduced as part of the UK Government’s Electricity Market reform. It incentivises investment in low carbon generation by providing greater certainty and stability through reducing exposure to volatile wholesale prices, while protecting consumers from paying higher support costs when the electricity price is high. The UK Government recently announced that Remote Island Wind will be eligible to compete for CfDs in these auctions for the first time.
Generators who are successful at auction enter a contract with the Low Carbon Contracts Company Ltd (LCCC) – a private company, wholly owned by the Secretary of State for Energy and Climate Change. Payments are then made either by LCCC to the generators, or vice versa, depending on whether the pre-agreed price for the electricity produced (the ‘strike price’) is greater or less than the average market price for electricity at the relevant point in time (the ‘reference price’).