To ask the Secretary of State for Business, Energy and Industrial Strategy, what role the concept of baseload generation plays in his Department's planning for the future electricity system, allocation plans for contracts for difference and calculation of value for money of different generation sources.
The concept of baseload refers to generation that operates continually throughout the year. As electricity demand varies widely from day to night and by season, there is a limit to the need for baseload generation which is less than the summer minimum demand. Baseload generation brings both benefits and costs to the system relative to generation that is designed to operate more flexibly or is intermittent.
The electricity system already has many features that reward different types of generation depending on the demands of the system. When considering value for money, Government considers whole electricity system impacts. This includes the benefits of baseload generation relative to other technologies, and the cost of it not being able to increase or decrease output rapidly and of procuring reserve capacity to cover the risk of failure.
The Capacity Market is at the heart of the Government’s plans for a reliable energy system; it secures the capacity required to meet peak demand through auctions held four and one year ahead of delivery. It supports technically reliable existing plant to remain in the market and, as coal and other ageing plant retire, it will strengthen incentives for new plant to be financed and built.
The Contracts for Difference scheme allocates support using a competitive auction process to projects with the lowest price bids, which drives efficiency and cost reduction. The scheme has been a success in delivering substantial new investment and helping to deliver significant reductions in the costs of some renewable technologies. We keep it under review in order to ensure it continues to operate effectively and deliver value for money to the consumer.