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11 December 2012 | Anna Reynolds
The UK government is changing its approach to energy buying, adopting a model that aims to boost renewable generators and create contract opportunities for domestic businesses.
The ‘Energy for Growth’ scheme will be piloted in the new year when the government will tender for generators to supply 2 per cent of the energy bought by the Government Procurement Service (GPS), worth up to £25 million each year. GPS currently buys energy for 75 per cent of the public sector. If the pilot is successful, GPS will diversify up to half of its entire energy portfolio over the next five years.
In addition, long-term contracts of up to 25 years – ‘power purchase agreements’ – will be offered to renewable generators for a set proportion of their output. This will enable generators to attract investment from banks and, in return, the government will agree the best price. Savings for taxpayers of around £155 million are expected to be made over the next 15 years.
Speaking at the Energy for Growth conference yesterday, cabinet office minister Francis Maude said the new strategy would “take centralised buying to a whole new level” and increase transparency of government buying plans.
Maude explained the government gets tied into three-year contracts with single suppliers who manage generators. “By going through a middleman in this way we can’t guarantee a proportion of the energy comes from UK-based sources,” he said.
He described the government as “the energy market’s best customer”, but criticised the failure in the past to use its “huge purchasing power to support UK businesses and the green energy sector”.
The pilot aims to boost the green energy sector through government investment in some of the 150 renewable energy projects that have stalled in the current economic climate.