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Another route to secure sustainable energy

Wayne Mitchell

Wayne Mitchell is Director of Markets & Innovation for npower Business Solutions, responsible for overseeing the development of energy products, services, and solutions for some of Britain's largest businesses.

We know that security of supply is a keen concern for many energy consumers – and last week, new research from the CBI mirrored our own recently-commissioned YouGov survey findings, with 80% of senior business leaders expressing fears about future energy security.

The CBI research also found that 96% of those questioned think political uncertainty is discouraging investment in the energy sector, with 89% favouring an independent infrastructure body to create greater future stability.

20% renewable energy by 2020?

Certainly, if the UK is to reach its impressive targets – 20% renewable energy by 2020 and 80% less emissions by 2050 – encouraging the generation of more sustainable energy is vital. So last month, we sought the views of large-scale independent renewable generators, when we hosted a workshop to discuss the future of Power Purchase Agreements (PPAs).

On both sides of the market, Electricity Market Reform (EMR) is shaking things up. As you are no doubt aware, Contracts for Difference (CfD) will replace the current Renewables Obligation (RO) as the main mechanism to support future clean energy generation.

Generators unsure of future market

Yet feedback from the generators we spoke with suggests there’s a reluctance to take up the offer of a CfD over the existing RO, which will continue to be available until March 2017. Unlike the RO, there is a cap on the overall CfD budget, so payment is not guaranteed, and there are also concerns that DECC may review the CfD allocation process after the first round.

What’s more, CfDs deal in specifics – and when you’re a renewable generator, a contract that requires a set installed capacity can be difficult to fulfil exactly, as the build phase of a project is not 100% predictable.

Shaping the next generation of PPAs

This sort of feedback helps us to shape the future PPAs we offer these generators, so we can continue to deliver a growing volume of renewable energy to meet our customers’ needs.

Flexibility, it appears, is key – not only to accommodate fluctuating levels in generation but also to adapt to market conditions throughout the contract’s life cycle.

Monitoring and consulting

While the market adapts to the new mechanisms brought about by EMR, we will continue to monitor and share developments. And we will also continue to consult with all those involved – customers, generators and policy makers.

As one of the generators participating in our PPA workshop said: “None of the big suppliers have done anything like this before, it's a great idea and really innovative." Nice to hear, but please help us continue to stay ahead of the game by sharing your requirements and concerns so we can innovate and support you as best we can.

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