Early contracts for renewable electricity

By awarding contracts worth up to GBP16.6 billion to eight renewable electricity generation projects without price competition, the Department of Energy and Climate Change failed to adequately secure best value for consumers. The Department argued that the early contracts were necessary to ensure continued investment. However, price competition should have led to lower energy prices for consumers who are already facing hefty charges. The Department had no detailed knowledge and understanding of the developers' costs and estimates, and it did not robustly challenge developers who claimed investment would not happen if the contractors bore more of the risk of inflation. The Department should have learnt the lessons from PFI. The Department simply did not include claw-back provisions which would have ensured that hard-pressed consumers shared in any excessive profits achieved by project developers. Most of the budget available under this new scheme - 58 per cent - has already been spent on the early contracts awarded without price competition. So much was allocated without competition that little is left for testing the market and securing the best value for consumers.
Given that the Department's own data shows significant new renewable generation capacity is in construction, awaiting construction, or seeking planning permission, it is not clear that these early contracts were all necessary to meet the 2020 targets. What is now needed is a shift to full price competition, contracts which allow some claw-back for consumers of any excessive profits, and a balance of technologies which hits climate targets at least cost for consumers