Watchdog Critical of Energy Deals

The National Audit Office has weighed in with criticism of £16 billion worth of renewable energy deals that have been agreed without being put out to competitive tender. It follows on from doubts voiced by watchdog Which? recently over the government’s Contract for Difference policy, saying that it could add to consumer bills rather than reduce them.

It comes as energy supplied by renewables such as wind, solar and other green options is up by 43% compared to this time last year, according to the Department of Energy and Climate Change. Despite this, the NAO have now waded in with concern that 5 wind farm and 3 biomass projects have been given the go ahead without the competition that would see consumers get a better deal.

Ministers argue that these ‘significant investments’ will contribute much to the UK reaching its 2020 energy targets. NAO experts are less sure, saying that there is no evidence that the award of fewer early contracts would have that much effect, and may in fact be counterproductive. The criticism is that the Contract for Difference policy change would give consumers more chance of a competitive market which far outweighs any reason to award contracts early.

There is also an issue with committing so much of the available renewable energy funding to projects such as those won by SSE and Dong Energy that will only achieve 5% of the 20% target for 2020. A spokesman for the Department of Energy and Climate Change commented that they were playing catch up after years of under investment in renewable energy programs and that the early contracts will represent significant benefits to bill payers.

Margaret Hodge MP, however, has also raised concerns over the awarding of the contracts, adding that “private providers must not be allowed to make excessive profits at the expense of consumers and taxpayers.”

The new Contracts for Difference subsidy regime will be introduced in Spring of 2015 but has already come under criticism from a variety of sources including opposition members and green activists. They are long term contracts that are designed to provide incentives and a stable environment for private companies to invest in green energy such as wind farms and solar power.

While many believe that they are better than the old system of renewable energy subsidies there are others who are not so sure.

According to the NAO awarding the contracts early on this occasion could boost confidence in renewable energies but that the scale of the awards may mean that consumers will have to cope with increased costs. The contracts account for 58% of the amount that will be made available for Contracts for Difference up until 2020 and have been awarded far too early according to some. The Department of Energy and Climate Changes point of view is that not awarding the contracts may well have risked these energy developments being stalled or not going ahead at all.