I am today announcing a consultation on the Government’s proposal for an Offtaker of Last Resort mechanism, which will support investment in independent renewable electricity projects.

This Government is committed to delivering greener energy at least cost, as well as ensuring on-going security of electricity supplies. The Government’s Electricity Market Reform (EMR) programme provides an ambitious package of measures to incentivise the investment needed to replace the UK’s ageing electricity infrastructure with a more diverse and low-carbon energy mix. Up to £110 billion of capital investment is needed from now until the end of the decade. The Government’s objectives for EMR are to: ensure a secure electricity supply; ensure sufficient investment in sustainable low-carbon technologies; and minimise costs to, and ensure value for money for, consumers. It is imperative that independent renewable generators are able to access the energy market and help deliver this goal. The Offtaker of Last Resort will be vital to improve the route-to-market options for such generators, which will help unlock a significant pipeline of projects and bring essential competition, diversity and innovation to the market.

The Offtaker of Last Resort will provide eligible renewable electricity generators with a guaranteed ‘backstop’ route-to-market at a specified discount to the market price. This will help investors and lenders understand the ‘worst case’ price that the generator will receive for its power, giving them more certainty over the route-to-market risks and enabling generators to accept more innovative routes to market. It is intended that this will also allow generators to compete on a level playing field, and bring more competition and innovation into the generation market generally. The Offtaker of Last Resort will aims to stimulate new supplier entry into the Power Purchase Agreement (PPA) market, as generators will not be constrained by lenders relying on large suppliers with strong credit ratings.

The OLR would be implemented by placing an obligation on certain suppliers to bid to manage a backstop PPA on specified terms with an eligible renewable electricity generator when requested, with the costs associated with managing the contract being socialised across all licenced suppliers.

The document published today outlines all the key design details for the Offtaker of Last Resort mechanism. We are seeking views on the key design features of the Offtaker of Last Resort outlined in our consultation document until 24 March.

I will today be depositing the consultation document in the libraries of the House and it can also be accessed on GOV.UK