Caution urged over wholesale CfDs

Researchers have warned that wholesale CfDs are not an “automatic ticket to lower bills”.

The government has announced plans for the new mechanism to ‘de-link’ gas and electricity prices by voluntarily moving legacy generators onto CfDs.

However, a study by University College London said not all generators would equally value the main ‘carrot’ of a fixed wholesale price and potentially insulation from future changes to the Renewables Obligation.

It said the government needs to carefully tailor the design of the scheme to achieve value for money while avoiding adverse impacts of CfDs on the system’s operational efficiency.

“While intended primarily as a vehicle for de-linking, it carries risks for consumers and the market, both in principle and in implementation,” the report warned.