2. Enhance the role of long-term markets
Long-term contracts, like power purchase agreements (PPAs), are an effective way to make inexpensive renewable energy more widely available for industries and households, protecting them from price hikes and limiting the impact of volatile electricity generation. It’s been encouraging to see a greater uptake of PPAs in recent years, and those who entered them early now find themselves at a considerable competitive advantage. We now need to see barriers to PPAs removed, and greater incentives for their wider application.
It is also worth weighing up the ongoing use of contracts for difference (CfDs) as a way of lowering the risk of investments in renewable energy – but only if they remain optional. CfDs have played an important role in the build-out of renewable energy so far, but it would be overly intrusive to obligate all new renewable energy assets to enter into them. If poorly designed, CfDs could harm the commercial flexibility and future system-flexibility of renewable energy production.