Multi-model value for money assessment of a unique dispatchable CfD

The dispatchable Contract for Difference (CfD) agreed between the UK’s Department for Energy Security and Net Zero and power generator Drax is a new and innovative contract structure. It involves annual and seasonal load factor caps and minimum generation requirements.

Baringa was commissioned to provide independent, objective and expert assessment of the value for money of this dispatchable CfD by Drax, as their generation under the contract would impact several aspects of the electricity system.

Baringa assessed value for money across multiple domains using its exclusive models, including:

• Generation cost – analysed by creating custom scenarios in our Plexos pan-European power market model to capture the details of the dispatchable CfD, and calculating the impact on wholesale prices and top-up payments to other CfD generators
• Capacity cost – estimated by creating a bespoke model of the GB T-4 2028/29 capacity market auction with and without the Drax capacity, and factoring in uncertainties around the supply and demand stack
• Emissions savings – total emissions savings were derived from our power market modelling, and valued using the difference between the UK Government’s ‘appraisal cost of carbon’ and the assumed market price of carbon
• Option value of BECCS – previous whole energy system analysis by Baringa for Drax found that deploying carbon capture technology at Drax power station could reduce the cost of meeting the UK’s legally binding carbon targets by £15 billion over 20 years

This showed that the dispatchable CfD is expected to lead to cost savings in the electricity system of £1.6 - £3.1 billion over four years, and carbon emissions savings valued at £960 million.

Contact us if you would like to understand:

• How our bespoke power market models could help you understand risks and opportunities for your assets
• More about our capacity market modelling capabilities
• How we can use whole energy system models to explore the value of different decarbonisation options over the long term.

View the report here, and register here for regular insights on energy, utilities and natural resources from Baringa.