Supporting independent renewable investment: offtaker of last resort

This government is committed to delivering greener energy at least cost, as well as ensuring on-going security of electricity supplies. The government’s Electricity Market Reform (EMR) programme provides an ambitious package of measures to incentivise the investment needed to replace the UK’s ageing electricity infrastructure with a more diverse and low-carbon energy mix. Up to £110 billion of capital investment is needed from now until the end of the decade.

It is imperative that independent renewable generators are able to access the energy market and help deliver this goal. The Offtaker of Last Resort will be vital to improve the route-to-market options for such generators, which will help unlock a significant pipeline of projects and bring essential competition, diversity and innovation to the market.

The Offtaker of Last Resort will provide eligible renewable electricity generators with a guaranteed ‘backstop’ route-to-market at a specified discount to the market price. This will help investors and lenders understand the ‘worst case’ price that the generator will receive for its power, giving them more certainty over the route-to-market risks and enabling generators to accept more innovative routes to market. It is intended that this will also allow generators to compete on a level playing field, and bring more competition and innovation into the generation market generally. The Offtaker of Last Resort also aims to stimulate new supplier entry into the Power Purchase Agreement (PPA) market, as generators will not be constrained by lenders relying on large suppliers with strong credit ratings.

DECC is seeking views on the key design features of the Offtaker of Last Resort including (but not exclusively) which generators are eligible, which electricity suppliers are obligated to participate in the scheme and which can do so voluntarily, how the Offtaker of Last Resort will be allocated, and what its terms and conditions will be.

Energy Secretary Edward Davey’s written statement to Parliament is available in the news section of GOV.UK

DECC is seeking input from as wide a range of interested parties as possible and the consultation includes a series of broad questions to help shape contributions from interested parties. The government response, which we expect to publish in Summer 2014, will draw on evidence submitted during the 6 week period.