Spending watchdog criticises ministers over £16bn renewable energy deals

A parliamentary spending watchdog warns today that the government may have handed benefits to corporate power providers at the expense of consumers by awarding £16.6bn of renewable energy contracts without putting them out to competitive tender.

The criticism from the National Audit Office came as statistics released by the Department of Energy and Climate change showed that a fifth of all electricity was generated in Britain by solar, wind and other green technologies in the first three months of the year to 18.1 terawatt hours, enough for 15m homes and up 43% on the same period of 2013.

The audit office said that it understood the department gave the early green light to five offshore wind farms and three biomass projects to keep up the pace of "green" investments to meet EU energy targets before the introduction of a new "contracts for difference" subsidy regime next spring.

"The [£16.6bn] investments support should contribute to the UK's achieving its energy target in 2020, but it is not clear that awarding fewer early contracts would have put the achievement of that target at risk," said Amyas Morse, head of the audit office.

"As the contracts-for-difference regime has the potential to secure better value for consumers through price competition, committing so much of the available funding through early contracts, without competition, has limited the department's opportunity to secure better value for money," she added.

The watchdog noted that the eight contracts to companies such as SSE, Dong Energy and Drax will provide only 5% of the 20% target, while the operators are still able to reduce their project capacity in future by 36% without financial penalty.

But a department spokesman said the government had been dealing with a legacy of under-investment and neglect in UK energy as well as trying to decarbonise electricity supplies: "These early contracts are designed to offer better value to billpayers than the previous system and have reassured those we need to invest in our energy security. Without that investment, projects would have been unable to go ahead or been significantly delayed, putting our future energy security at risk."

A leading opposition MP regretted there were not more safeguards in these contracts to ensure better value for money. Margaret Hodge MP, chair of the public accounts committee, added: "This is an issue we have raised as a committee before: private providers must not be allowed to make excessive profits at the expense of consumers and taxpayers."