Davey proposes major shake-up of green energy contracts to ‘slash bills'

South Wales Argus

15-07-2025

The Liberal Democrat leader will call for a 'rapid' transition to Contracts for Difference (CfD), which work by guaranteeing generators a fixed 'strike price' for electricity regardless of the wholesale price.
CfDs are awarded by Government auction to firms bidding to produce renewable energy for the UK grid, with developers either paid a subsidy up to the strike price or repaying the surplus while the market price fluctuates.
In a speech at the Institute for Public Policy Research think tank, Sir Ed will say that only 15% of green power is produced under such contracts, with the rest still coming from an old legacy scheme.
The 2002 Renewables Obligation Certificates (ROC) scheme, which does not involve a strike price guarantee, closed to new generation in 2017 but still governs some projects on contracts due to expire by 2037.
Sir Ed will argue that the ROC scheme was introduced 'when ministers didn't have the foresight to realise that renewable power would get so much cheaper over the next two decades'.
He will call on ministers to move all legacy agreements on to CfD, saying the transition would slash household energy bills by 'breaking the link' between gas prices and electricity costs.
The party leader is expected to say: 'People are currently paying too much for renewable energy.
'But not for the reasons Nigel Farage would have you believe.
'Because generating electricity from solar or wind is now significantly cheaper than gas – even when you factor in extra system costs for back-up power when the wind isn't blowing or the sun isn't shining.
'But people aren't seeing the benefit of cheap renewable power, because wholesale electricity prices are still tied to the price of gas.'
Sir Ed will add: 'Unlike Contracts for Difference, companies with ROCs get paid the wholesale price – in other words, the price of gas – with a subsidy on top.
'Subsidies paid through levies on our energy bills – costing a typical household around £90 a year.'
The Lib Dem leader will describe the legacy system as 'manifestly unfair' for consumers and call on the Government to 'start today a rapid process of moving all those old ROC renewable projects on to new Contracts for Difference.'
Taking aim at the Reform UK and Tory leaders, who have both expressed scepticism about the Government pledge to achieve net zero by 2050, Sir Ed will say: 'The narrative – seized upon by Nigel Farage and Kemi Badenoch – says the reason energy bills are so high is that we're investing too much in renewable power.
'And if we just stopped that investment – and relied more on oil and gas instead – bills would magically come down for everyone.
'The experience of record high gas prices in recent years shows that's not true… we know that tying ourselves ever more to fossil fuels would only benefit foreign dictators like Vladimir Putin – which is probably why Farage is so keen on it.
'But refusing to engage hasn't stopped his myths from spreading, from gaining traction in the new world of fake news. So we must change that.'