UK’s Rudd approves CMA findings on wholesale markets

The UK energy secretary Amber Rudd has backed the provisional findings of the Competition Market Authority’s (CMA) investigation into wholesale gas and electricity markets, which found no evidence of anti-competitive behaviour.

The findings, published last month, reiterated the CMA’s initial stance earlier this year that competition in the UK’s wholesale markets is generally effective and vertically integrated companies do not gain an unfair advantage over independents (see EDEM 7 July 2015).

“I note that you continue to maintain your views expressed in the Updated Issues Statement with respect to competition operating well in the wholesale electricity market and to vertical integration not hindering competition,” Rudd wrote in an email to the investigation panel’s chair Roger Witcomb.

“These are important findings and I hope that your work in combination with the detailed supporting material will settle this debate for the GB energy markets.”

Although the CMA will publish its definitive findings towards the end of the year, Rudd’s letter will be welcome news to the industry after several years of severe scrutiny into the wholesale sector.

Renewable concern

However, further ominous signs emerged for the renewable sector as Rudd pledged to take on board the CMA’s criticism of the process behind running the Contracts for Difference (CfD) subsidy scheme for renewable energy projects.

The CMA cited continued concerns that the CfD scheme, which delivered 2GW of projects through a competitive auction process earlier this year, is open to excessive intervention by the government.

Less developed renewable technologies such as offshore wind are protected from competing with more established technologies such as solar and onshore wind in the auction. Furthermore, tidal and carbon capture and storage (CCS) technologies are not obliged to compete for contracts but are awarded on a discretionary basis by the government.

“I am looking at your proposed remedies relating to the detailed implementation of Contracts for Difference with interest and can assure you that a competitive process has always been at the heart of our approach to allocation,” Rudd wrote.

The tougher rhetoric means that projects such as the 320MW Swansea Bay tidal lagoon and the 426MW White Rose CCS plant, which are immune from competing in an auction, could encounter tougher negotiations with the department of energy and climate change (DECC) over the awarding of contracts. henry.evans@icis.com