Caution urged on plans to break link between gas and power prices

A report has urged caution on Government plans to break the link between gas and electricity and extend of the CfD scheme to legacy assets.

Energy consultancy Regen said the “pragmatic” policy changes could provide a degree of protection for consumers against future price shocks, but are not a panacea for lowering consumer bills in the near term.

“They also require careful, detailed design and implementation to ensure value for money and to avoid further market distortion,” the report cautioned.

Proposals for a Wholesale Contract for Difference to voluntarily transition existing low-carbon generators from Renewables Obligation (RO) schemes to long-term fixed-price deals could provide a hedge against future price increases, but also carry the risk of being overpriced or have very low uptake.

“Even if they did result in a modest reduction in wholesale costs, much of the current bill increase stems from non-commodity costs, including the cost of making up for years of underinvestment in our electricity infrastructure and preparing the power networks for a future increase in energy demand for heat and transport,” the report said.