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Posted on: 01/08/2022
Last week James Clark, Business Development Manager and Alex Walmsley, Head of Pricing hosted our Generator Revenue Streams webinar. They discussed key headlines and regulatory updates including the removal of BSUoS from generation; REMA; and the latest CFD auction results. In this blog James Clark considers the impacts of the latest regulation on independent generators, as well as the opportunities these changes create.
Removal of BSUoS charges from generation
Following the recommendations from the BSUoS (Balancing Services Use of System) task force's report, released in September 2020, Ofgem published Decision CMP308 in April 2022. Their decision removes BSUoS charges from generation and demand to Final Demand only, effective from 1st April 2023. Historically BSUoS has been charged against all generators as cost recovery charges.
This April BSUoS charges were already removed for embedded generation however, from April 2023 BSUoS will also be removed for transmission connected generators. In theory, this should lower the wholesale market prices as transmission connected generators no longer need to factor BSUoS charges into their cost stacks, however with such an elevated market this is still unpredictable.
Review of the Electricity Market Arrangements
BEIS issued its consultation on the Review of the Electricity Market Arrangements (REMA). This has been the labelled the biggest and most significant review of the UK electricity market for 20 years. It’s been launched by the UK government to radically enhance energy security and to cut costs of electricity for consumers in the long run.
Highlights from the proposal for the initial consultation include, exploring changes to the wholesale market that would stop volatile gas prices setting the price of electricity produced by much cheaper renewables. This is coupled with immediate action to help consumers with higher energy bills this year. As the Government continues to be on the side of British energy consumers, the knock-on effects for generators will become clearer when the consultation ends in October 2022.
Contracts for Difference AR4 Results
The Contracts for Difference (CfD) scheme is the government’s main mechanism for supporting large scale low-carbon electricity generation. The scheme uses auctions, otherwise known as ‘Allocation Rounds’ and are expected to be held annually to reach the government’s net zero targets. Results of the CfD auction 4 results were published earlier this month with almost 11GW of capacity secured, making this year’s auction the biggest to date.
Generation technologies are grouped into one of three pots:
- Pot 1 for established technologies including solar and onshore wind. This year was the first year these technologies have been included in the allocation round since the first round in 2015.
- Pot 2 was allocated for emerging technologies, such as floating offshore wind and tidal.
- Pot 3 was dedicated exclusively to offshore wind.
Looking the results, 93 contracts were awarded bringing just under 11GW of new capacity to the grid.
Offshore wind continues to dominate the scheme with 65% of the new capacity awarded to 5 offshore wind contracts. Their strike prices cleared at the lowest level of any technology, even though CapEx costs are rising.
If you were successful in the latest CfD auction and are looking to secure a PPA contract, please download our Product Information Sheet or contact us to find out more about the long term PPAs we offer that align with the commercial terms of your CFD commitment, providing new build prtrellojects a viable route to market and a bankable PPA partner.
