Energy bills may rise if government gives Drax more support, say MPs

theguardian.com:

MPs have warned consumers may end up paying higher bills if the government rushes into providing further state support for power station owner Drax.

As part of Liz Truss’s £150bn energy bills freeze, renewable and nuclear power generators are being asked to supply electricity below current market rates.

Officials have begun to “negotiate” with generators on older wind, solar and nuclear contracts, which have benefited from windfall gains as the price of gas has soared, to persuade them to switch to newer, less lucrative deals, which lock in lower prices in return for guaranteed long-term income.

It is understood Drax, which owns the vast power station complex in North Yorkshire and is Britain’s single biggest source of carbon emissions, could also negotiate over units 2 and 3 at its plant, which receive renewable obligation certificate (ROC) payments for burning biomass wood pellets, making them eligible for the scheme.

Generators are not obliged to negotiate with the government as the scheme is voluntary. Drax has not yet confirmed whether it plans to rework its contract. It said it is “working in partnership with the government to find ways in which we can support the country during the energy crisis this winter”.

However, there are growing fears that the government is in a weak negotiating position as generators will need to be convinced to forgo high prices that are unlikely to abate for some time, meaning officials could rush into deals that later prove a poor deal for taxpayers if the spike in wholesale gas prices quickly subsides.

The thinktank Ember calculates that, from 2012 until 2027, when Drax’s ROC subsidies end, it will have collected more than £11bn in government payouts. It is understood the new contracts could