Question

To ask Her Majesty's Government, further to the Written Answer by Baroness Verma on 16 June (WA 23–24) on energy prices, what evidence there is to suggest that smaller suppliers will be capable of developing a conditional Contracts for Difference (CfD) powerpurchase agreement (PPA) in time for the first CfD auctions in October 2014; and whether their reliance on the development of conditional PPAs to support the participation of independent generators is in line with the suggestion made by the Minister of State for Energy, Michael Fallon MP, on 4 December 2013 during the passage of the Energy Act 2013 that electricity market reform would "result in greater competition among PPA providers and support smaller suppliers, as generators will not have to rely on large incumbents with strong credit ratings to sell their power in the market" (HC Deb, col 970).

We anticipate that some generators will seek to establish the terms of any PPA and financing arrangements before they participate in the CfD allocation round, in order to understand better their likely costs. Such conditional PPAs could take a number of forms, from indicative terms to a signed contract.

In 2013, DECC officials established an industry Market Readiness group to prepare the market for offering CfD PPAs. There are now a number of PPA providers discussing terms with potential developers but these discussions are commercially sensitive.

The Offtaker of Last Resort will allow generators to develop their projects using shorter-term PPAs with smaller suppliers. We are on track to introduce enabling regulations to have the OLR mechanism in place ahead of the first CfD allocation in Autumn 2014.