Explore the Challenges

Which challenges are the schemes trying to address?

The UK needs a secure low carbon electricity system at a cost-effective price for consumers. To achieve this, the CfD and CM schemes are designed to tackle three market challenges.

1. Decarbonisation

There is an urgent need to decarbonise our economy. In the electricity sector this means we need to change from fossil fuel-based power stations (like coal and gas) to clean low-carbon generation (such as wind). In June 2019 Parliament set a new target to achieve a ‘Net Zero’ target by 2050, and in December 2019 the target for offshore wind was raised from 30GW to 40GW by 2030.

2. Replacing old power stations

Many of the UK’s coal, nuclear and gas power stations are reaching the end of their life span. Their closure will create a shortfall in power generation, sometimes referred as a Capacity Gap. The UK will need new power stations to replace them.  Electricity users will also need to find ways to consume less electricity.

3. Investment challenge

Billions of pounds of investment will be needed over the next three decades to replace the old power stations with low carbon generation. In the 2020s alone around £50bn is needed just to build the offshore wind farms needed. It’s vital that this is obtained at the lowest possible cost.