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Government accused of inflated renewables deals

Power firms may have received inflated energy price deals for eight major renewables schemes, the government’s spending watchdog has warned.

The National Audit Office today said it was unconvinced of the benefits of awarding the ‘contracts for difference’ - worth an estimated £16.6bn - without competition.

Contracts for difference effectively guarantee energy generators subsidies from the government where they sell green energy below an agreed ‘strike price’.

In order to speed investment in renewables projects, the Department of Energy and Climate Change agreed strike prices without competition for five offshore wind farms and three biomass schemes.

But the NAO said: “This decision may provide higher returns to contractors than needed to secure the investment and also limits the amount of remaining budget subject to competition in later rounds.”

It added: “The early contracts have given the UK’s renewable industry greater confidence in the near term; and have contributed to the transition to the reformed electricity market.

“However, the scale of early contracts for renewables, awarded without competition, may have increased costs to consumers.”

A DECC spokesperson said the government had been dealing with “a legacy of underinvestment and neglect” in the energy system.

“We’ve needed to drive through reforms to secure investment in new generation to keep the lights on in the years and decades ahead while decarbonising our electricity supplies, and getting the best possible deal for consumers,” said the spokesperson.

“As the NAO’s report recognises, these early contracts are designed to offer better value to bill-payers than the previous system and have reassured those we need to invest in our energy security. Without that investment, projects would have been unable to go ahead or been significantly delayed – putting our future energy security at risk.”

The full NAO report is available here.

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