UK Government urged to auction contracts for renewable energy

As an analyst who is linked to the Conservative Party has said, the UK should hold competitive auctions in order to give out renewable power contracts to other companies in a bid to reduce the costs of technology as well as reduce the effect that they have on the electricity bills of the consumers. At present, the costs of electricity generation via renewable energy are substantially higher, and that is because there hasn’t been much innovation in the field as yet. By auctioning off the renewable energy contracts to different companies, the country can hope to generate renewable energy at much lower prices, which will ultimately have a positive impact upon the electricity bills. In a report that was revealed earlier today by the Policy Exchange, it was stated that other sources of electricity generation such as onshore wind power, biomass and even energy from waste could become viable competitors against each other for the contracts that are put forth for electricity generation. The report also revealed that solar power should also become a viable competitor come the next year, and it would be in the best interests of the country to hold a technology specific auction with a set budget for all offshore wind power generation.

Renewable Energy Contract Auction
Renewable Energy Contract Auction

In the past few years, the prices of electricity have become a very hot topic for the politicians of Britain, as the opposition Labour party has made widespread promises to freeze all bills if it wins the next elections which are to be held in 2015. These publicly made promises immediately spurred the ruling parties into action, and the Liberal Democrats and the Conservatives began to make alterations. As per the estimates which have been made by the government, it is suspected that support for renewables will put an increase of around £132 on a typical household bill, come the year 2020.

The Policy Exchange also stated the reason, because of which the government should opt for auctioning rather than administrative price setting, as it would reveal the pricing information and also allow for making cheaper bids. The Policy Exchange also stated that the government should try and push forward the time table set for introducing the auctions in the energy market. At present, the government is trying its hardest to initiate an investment of 110 billion pounds in order to change the older power plants within the country, while still meeting the emissions cap and keeping the renewable energy targets in check. Because of this, the Parliament, only last week signed a law which altered the electricity market as well as changing the setting of prices by using numerous low carbon generation technologies up till 2019.

The Policy Exchange further continued by stating that even though the government had planned to eventually move towards competitive auctions, the move, as yet, wasn’t very well defined. The Policy Exchange cited the example of the rapidly falling costs of wind power in Brazil as one of the primary reasons why competitive auctions are a viable solution and can bring about long term stability and success to the electricity market.

For offshore wind generation, the Policy Exchange stated that the government should put a ceiling on the prices in 2020, while the starting point that the government should use is an industry goal of 100 pounds per megawatt hour. The prices mentioned in the report by the Policy Exchange are approximately 40 pounds lower than the prices which the government has set for projects related to offshore wind power which are to begin from the tax year that ends on March 31, 2019.

Furthermore, the Policy Exchange also put forth some recommendations to the government, one of which was to scrap the goal which the country had set before the European Union of generating around 15% of all the energy, inclusive of transportation and heating, by making use of renewable sources of energy come the year 2015. The Policy Exchange stated that the goal actually meant producing as much as 35 percent of the power from clean sources, which is a pretty difficult figure to achieve in such a small span of time.

The Policy Exchange was created more than a decade ago, in 2002, and its first chairman was Michael Gove, who is the current Education Secretary. Other founder members included Francis Maude as well as Nick Boles, who is another lawmaker who belongs to the current Conservative Party. These reports shed a deeper light on the way the electricity market should shape up in the next few years, because the government’s renewable energy targets are likely to become pretty difficult to achieve in such a small span of time. However, other companies have also expressed interest in applying for auctions and investing in wind power farms within the United Kingdom. As the government recently announced a much improved subsidy regime for all offshore wind farms, one of the largest wind farm companies in the world, Dong Energy, has stated that nothing can hold back investment in the North Sea.

Numerous other companies have begun to move towards renewables in an attempt to curb emissions and prevent damage to the atmosphere. Australia has also rapidly evolved, and considering the amount of sunlight that the country receives, Australia has rapidly transitioned towards renewable sources of energy and surpassed the one million mark in solar units installed earlier in the year. This is partly due to the rising prices of electricity all over the globe, as people find it very difficult to maintain their bills without having to cut down on their living requirements significantly. As a result, a large portion of the population have begun to look for ways by which they can generate electricity on their own and reduce their costs. However, with offshore investment likely, as well as the government’s alterations in the pricing mechanism, an improvement is all the more likely and in the next few years, the impact of the changes will soon become clear.