The UK electricity market faces a number of challenges, with the rapid closure of existing capacity as older, more polluting plant goes offline, alongside the growth of our economy and increasing electrification of our heat and transport systems. Around £100 billion of private sector investment is needed by 2020 to replace and upgrade the UK’s electricity infrastructure. Contracts for Difference (CfD) is a mechanism for bringing forward investment in low carbon generation. It provides long-term price stabilisation to low carbon plant, allowing investment to come forward at a lower capital expenditure and therefore at a lower cost to consumers. A CfD provides greater price stability to an electricity generator by reducing its exposure to volatile wholesale prices, whilst protecting consumers from paying for higher support costs when electricity prices are high. In this way, CfDs are intended to provide efficient long-term support for low carbon generation.

Carbon Capture and Storage (CCS) is a potentially important technology for the decarbonisation of electricity generation and industrial processes, and is expected to play a key role in the reformed electricity market. The policy intent is that CfDs should be available to CCS projects irrespective of whether or not they are based on new or existing power stations. However, under the terms of the existing Regulations, a power station that retrofits a CCS system is ineligible for a CfD. This consultation seeks views on the Government’s proposal to amend the Regulations in order to enable retrofit CCS projects to be eligible for a CfD.

The Government proposes to amend the Regulations in order to specify that retrofit CCS projects are eligible for a CfD. This would include instances where an existing generating station, or part of it, is to be connected to a complete CCS system. The proposed amendment would ensure that existing CCS policy is correctly and expressly reflected in the CfD legislation. We are feeding back on this consultation and would welcome your comments on whether this is a move you support. The deadline for comments is 2nd December 2015. Email or register to post your comments on the website.

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