Solar sector supports bill reduction plans using fixed price contracts for renewable RO generators
Solar currently provides around 4% of the UK’s electricity year-round. Image: Getty.
The solar sector has thrown its weight behind plans to reduce energy bills by offering fixed price contracts to active renewable energy producers.
First offered by the UK Energy Research Centre, the voluntary scheme would offer those developing a project under the Revolving Bond (RO) scheme a new fixed-price contract based on the Contracts for Difference (CfD) system. .
The OR offered producers a fixed subsidy to cover the cost of investing in their older, more expensive assets. Electricity from these assets was then traded on the general wholesale market.
It closed in 2017, but in 2020/21 around a quarter of the UK’s total electricity consumption was still generated by RO companies.
According to Solar Energy UK, RO has helped bring costs down so significantly that solar is one of the cheapest sources of energy available in the UK, with many new installations in recent years being exempt from subsidies.
RO energy is largely pre-sold, so the revenue generators currently receive does not reflect the steeply increased price in the wholesale spot market. But with high prices looking set to remain for the foreseeable future, there is a risk that consumer costs could rise further if the RO scheme is not reformed, the trade association continued.
As such, potential replacement programs are being considered to ensure costs are met while preventing consumers from being impacted by even higher market prices due to marginal gas pricing.
This would also be linked to the ongoing review of electricity market arrangements, which is considering the decoupling of the price of electricity from the price of gas, and would work to improve rather than damage investor confidence, as so could calls for exceptional taxes on producers.
Moreover, these proposals would also help to slow inflation and provide long-term stable income for renewable generations.
Two options are offered as to how such a fixed price system could be introduced. The first would be to retain RO payments in exchange for companies negotiating the right to sell electricity on the wholesale market.
The second is more complex and would see both RO payments and market sales replaced by a CfD. This could lead to larger bill reductions in the short term.
“We have started to review the renewable energy support reform proposals, which we will need to be sure will work as intended to both support the sector and tackle the rising cost of living,” said Chris Hewett, CEO of Solar Energy UK.
“There is a lot to work out the details, but major industry players are very supportive of the principle. Continuing to let natural gas set the price of electricity is not in the interest of the country. is clear that expanding renewable energy such as solar is the key to low-cost generation, energy security and reaching net zero We are ready to talk with new ministers as soon as they enter active.
Solar Energy UK is the latest trade association to back such proposals, following Energy UK and RenewableUK, underscoring the level of support for such a move from the clean energy industry.