The National Audit Office has attacked the government over its decision to award more than £16bn-worth of renewable projects without competition.
In a report, the NAO criticised the Department of Energy and Climate Change for awarding the eight major schemes – a mix of biomass and offshore wind projects – without any price competition in an effort to avoid an investment gap.
The move kick-started the schemes at least five months early, but NAO auditor general Amyas Morse expressed doubt over whether the decision offered value for money.
“Committing so much of the available funding through early contracts, without competition, has limited the department’s opportunity to secure better value for money,” he said.
The early contracts, the majority of which run for 15 years, were made under the DECC’s Final Investment Decision enabling for Renewables (FIDeR) initiative.
The projects include biomass conversion plants in Selby, Yorkshire by Drax and in Ashington, Northumberland for Lynemouth Power. Five offshore wind plants were also awarded, including in Scotland, Liverpool and off the Yorkshire coast.
FIDeR was designed as a stop-gap before the department established its Contracts for Difference, which will come into force from 1 April 2015.
CfD will fix a strike, or generating, price for all the power generated by renewables schemes.
However, with a little under a year to go before it comes into play, the eight projects under the spotlight have already accounted for 42 per cent of the entire CfD budget (up until 2021).
Under FIDeR, the generators will be paid £63 per megawatt hour, a price the NAO said was too high. Strike prices for other producers up until 2016 are typically between £50 to £55 per MWh.
The NAO also said the government should re-examine the contracts and re-adjust the agreed strike price.
But speaking on BBC Radio Four’s Today programme this morning, conservative MP Tim Yeo, who also chairs the energy and climate select committee, claimed such a move would “destroy” the sector and be akin to the actions “of a banana republic”.
Mr Yeo, who described the report as “unusually sloppy”, said: “The strike price had to be set to encourage bidders and there was no question of alternative bids.”