Wind farms will no longer be able to deliberately delay contracts with the government to rake in higher profits, as ministers look to close a loophole in its price-guarantee offering.
Ministers set about changing terms on contracts for differences (CfD), which agree a set price for power with energy generators, after wind farm developers were found to be delaying start dates on deals to maximise profits.
Under the scheme the government pays renewable generators if the wholesale market is below the fixed price at bill payers expense, and visa versa if it sits above it.
Firms have been accused of taking advantage by postponing CfD start dates and generating power to sell at market rates though, which soared last year in the wake of the Ukraine war.
The new changes will “clarify that the flexibility in the contract for generators to delay their CfD start date should not be used to optimise electricity generation revenue,” the government said.
Companies will still be able to delay CfDs if they have a valid reason, such as construction delays.
The last CfD allocation round, in July last year, was anticipated to save the UK around £7bn in electricity cost, as per Energy & Climate Intelligence Unit research, since generators would be required to pay back excess revenue caused by gas pulling up other market prices.
Wholesale electricity sat as high as £200/MWh last year, while CfDs ensured wind generators could charge just £37.50/MWh, down from £120/MWh in 2015.
Clean energy group have slated the move however, suggesting it will place renewed strain on companies facing higher costs.
“At a time when developers are already having to deal with massive global increases in costs, this step will put further pressure on the viability of renewable energy projects,” RenewableUK market manager Michael Chesser said.
CfDs have also faced scrutiny in other areas, with biomass generator Drax Group (LSE:DRX) set to receive £11bn worth of public subsidies by 2027, according to think tank Ember, despite its plant still producing CO2.