Higher prices for renewables at auction are a necessary sticking plaster – but not a long-term solution 31 July 2024 Commenting on the Government’s announced budget for the 6th Allocation round of the Contracts for Difference scheme, Jonny Marshall, Senior Economist at the Resolution Foundation, said: “The failure of the last renewable energy auction has forced ministers to offer higher prices in the next one. While this is a necessary sticking plaster, future auctions should focus on low prices as well as rapid delivery. The prize here is lower bills, insulation from volatile gas prices, and reduced carbon emissions. “High interest rates and supply-chain constraints are driving up prices for developers, offsetting the fall in costs generated by technological improvements. But higher auction prices will contribute to electricity bills for 15 years, increasing the prices faced by families and reducing incentives for families to switch from petrol to electric cars, and from gas boilers to heat pumps. “If these economic pressures do not ease, ministers should assess if the current framework is fit for the challenge of decarbonising the entire electricity system by 2030. Other options – such as making more use of cheaper state financing to keep costs down, moving away from the ‘pay-as-clear’ model where all projects are awarded contracts at the price set by the most expensive winning one – should be the priority.”
