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NAO finds that contracts for difference is costing consumers £100 per year

An investigation conducted by the National Audit Office foun..

An investigation conducted by the National Audit Office found that rule changes made on the 2017 auction for contracts to support new, low-carbon electricity generation will cost consumers around £100 extra per year.

In 2017 the Department for Business, Energy and Industrial Strategy (BEIS) auctioned off 11 contracts of difference, meant to increase certainty and stability in revenue, to low-carbon electricity generation projects.

These contracts fix the price that generators receive for their electricity for a set period, with energy users paying a top-up if the market price falls below this amount.

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The National Audit Office found that the contracts auctioned off in 2017 will cost energy users around £1.5bn extra over the 15-year duration than if BEIS had not changed the rules.

Because BEIS did not test whether the contracts would lead to unintended consequences as it was now revealed that change in the design could have resulted in better value for consumer's money.

Three of the 11 contracts are offshore wind projects and the remaining eight were awarded to smaller “fuelled-technology” projects.

Read more: FCA gets tough on spreadbetters: But what is a contract for difference?

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