Ministers are considering an overhaul of the bidding process to fund new renewable energy projects in an effort to create green jobs, amid Joe Biden’s subsidy race.
The government said on Monday it has begun a review of the “contracts for difference” (CfD) scheme, which is used to determine the price of electricity from offshore wind and solar farms, with the aim of adding factors such as how many jobs they create to the regular auctions.
The move comes partially in response to the net zero review by the former energy minister Chris Skidmore and amid a global race to provide greater subsidies for renewables projects following Biden’s $369bn (£297bn) Inflation Reduction Act package.
Ministers are under pressure to boost the domestic supply chain for renewables projects and speed up Britain’s transition away from fossil fuels with the aim of reaching net zero by 2050.
Under the CfD scheme, the government awards 15-year contracts for low-carbon power generation projects such as solar and offshore windfarms.
Renewable energy generators bid for contracts to produce electricity, but the government can set a limit on how much capacity it wants in the auctions and can cap how much cash it provides as incentives.
The CfD system aims to give investors certainty over the levels of returns they can receive, amid wild swings in the price of power – as witnessed during the energy crisis.
Now, officials will examine whether the scheme can be revamped to reward developers that offer undertakings on more than just providing a certain amount of power within an agreed price range.
Prices for consumers have consistently fallen as technology to build renewables projects has improved over the past two decades.
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