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Green Energy Contracts Investigated

Following investigations into the Big Six earlier this year, the National Audit Office (NAO) has called for a number of green contracts to be investigated.

Government renewable energy contracts are under fire.

In total, eight contracts were signed earlier this year by the Department for Energy and Climate Change (DECC), supposedly to secure projects that were “at risk of investment delay”. However, the NAO have claimed that by aiding these companies, the government has failed to protect the interests of bill payers across the country.

In total, the contracts that were signed were worth a combined total of £16.6 billion, consisting of five offshore wind farms, two conversions of coal plants to biomass, and one biomass heat and power plant.

The NAO believes that the government’s decision to support these contracts was wrong, and that they paid too much money for the renewable resources “without price competition”, which could possibly lead to a rise in energy costs for consumers.

The UK government is currently committed to goals set by a European Union directive, which dictate that by 2020, 30 per cent of the country’s energy should come from renewable sources. In order to meet this target and drive investment in this area, the government is thought to have subsidised renewable energy suppliers.

To improve efficiency and help meet these goals, the DECC introduced the ‘Contracts for Difference’. The aim of this was to allow energy suppliers to bid for contracts, ensuring market competition and guaranteeing a fair price for bill payers, while also allowing the government to pay an agreed price for electricity.

However, as the system will not be fully operational until April 2015, the DECC was left in what it described as a “difficult position”, as current renewable energy measures are not substantial enough to meet the 2020 targets set by the EU. The department subsequently decided that the only way they could meet these targets, was to award early contracts to renewable energy suppliers, without going through the tender process.

Amyas Morse, head of the NAO, said: “The DECC awarded the early contracts without price competition to avoid an investment gap. As the Contracts for Difference regime has the potential to secure better value for consumers through price competition, committing so much of the available funding through early contracts, without competition, has limited the department’s opportunity to secure better value for money.”

 

Find out more about issues surrounding recent energy contracts:

The BBC discuss the audit: http://www.bbc.co.uk/news/science-environment-28041525

The NAO’s website: http://www.nao.org.uk/

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