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Energy: Prices

Question for Department for Energy and Climate Change

UIN 205511, tabled on 14 July 2014

To ask the Secretary of State for Energy and Climate Change, what estimate he has made of the total cost to consumers over the next 25 years of contract for difference and renewables obligation levy payments for (a) new nuclear, (b) offshore wind, (c) onshore wind, (d) hydro and (e) large-scale solar PV.

This answer is the replacement for a previous holding answer.

Answered on

21 July 2014

The Contract for Difference and Renewables Obligation levy payments over 25 years will depend on a number of factors for example the post-2020 deployment pathway, strike price degression, long term electricity prices and the timing of moves to a competitive price discovery process). For a detailed assessment of EMR, including cost-benefit analysis and consumer bill impacts, please refer to the Delivery Plan Impact Assessment1.

The Electricity Market Reform Delivery Plan2 set out strike prices for renewable technologies for the period 2014/15 to 2018/19. They provide a basis for renewable electricity to achieve at least 30 per cent of generation by 2020, in line with the EU renewables target. The generation mix beyond the period of the first Delivery Plan, from 1st April 2019, will be influenced by how individual technologies develop in the coming decade. We are committed to maximising value for money for consumers.

Chapter 6 of the Delivery Plan describes potential deployment requirements beyond 2020. It explores three levels of carbon intensity and three technology deployment scenarios as an illustration of a range of alternative pathways to meeting our post-2020 objective to reduce carbon emissions by at least 80% of 1990 levels by 2050. These scenarios are indicative: the electricity generation mix through the 2020s is unlikely to match any one of these scenarios exactly.

As an indicative estimate, the ranges of costs in the six scenarios set out in Chapter 6 of the Delivery Plan are shown in the table below3. Costs are aggregated over the next 25 years from 2015 to 2040, discounted to 2012 and in 2012 prices.

Indicative range of levy payments from 2015-2040 (£bn, real 2012)

RO payments

CfD payments

Nuclear

0

1-47

Offshore wind

12-13

17-79

Onshore wind

11-12

<2

Hydro

<1

<1

Large-scale solar PV

<2

<2

Source: DECC Modelling

The Levy Control framework, already agreed to 2020/21, is in place to control future costs to consumers and ensure these policies achieve their objectives cost effectively and affordably.

[1] https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/288463/final_delivery_plan_ia.pdf

2 https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/268221/181213_2013_EMR_Delivery_Plan_FINAL.pdf

3 Scenario with 100g CO2/kWh in 2030; Deployment Mix with Lower Grid Carbon Intensity in 2030 (50g CO2/kWh); Deployment Mix with Higher Grid Carbon Intensity in 2030 (200g CO2/kWh); Scenario showing higher deployment rates of CCS; Scenario showing higher deployment rates of nuclear generation; Scenario showing higher deployment rates of offshore wind

Answered by

Department for Energy and Climate Change
Named day
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