Labour shelves Net Zero contract auctions that subsidise solar and wind projects after finally admitting they might not be good value for money

Labour has paused the next round of green power auctions for wind and solar energy after admitting taxpayers were getting shortchanged. Energy Minister Michael Shanks told peers the contracts for difference system would be examined to see if it was working for consumers ahead of the 2027 round. Under the system renewables generators bid to receive an agreed rate for the power they produce. It has been widely criticised on cost grounds because while they have to pay back gains if the price rises above that rate, if the price of electricity drops below the agreed rate, firms are paid a top-up subsidy from consumer bills.

Ministers including Prime Minister Andy Burnham and Chancellor John Healey have been moving the government away from the hardline green policies followed by Ed Miliband when he was energy secretary as Labour faces pressure over the cost of living . Mr Shanks told the Lords' Environment Committee the auctions had given investors 'certainty to build new projects' with high up-front costs. But he added that after an upcoming round this year they would be paused while ministers 'look at whether we need some more significant changes to the contracts for difference scheme to make sure they work for the consumers of the country'.

Energy Minister Michael Shanks told peers that the next contracts for difference (CfD) sell off in 2027 will not go ahead pending changes to the way they work In February a record amount of solar power was among more than 200 new renewables projects awarded contracts to generate electricity The auction system has been widely criticised on costs grounds because if the price of electricity drops below the agreed rate, firms are paid a top-up subsidy from consumer bills James Alexander, CEO of the UK Sustainable Investment and Finance Association (UKSIF), said: 'Investors will be deeply concerned by comments from the energy minister today that cast doubt on next year's renewable energy auction (AR9). 'The Contracts for Difference model has been a crucial driver of investment in clean power, helping to secure record offshore wind capacity this year and build a world-leading renewables sector. 'But telling markets the government intends to review this process risks sending a worrying signal about the strength of the UK's commitment to the energy transition. 'We now need to see urgent clarity on the future of this process, or the government could put billions of pounds of capital at risk.'

Mr Healey wrote an article for The Times at the weekend in which he said that ministers would veto new clean energy projects if they added to the bill which taxpayers face when the Government pays the operators of wind turbines to turn them off when there is not enough cabling capacity to transmit their power. His intervention came as figures show that relying on wind power made September the most expensive month on record, with consumers liable for a staggering £505million surcharge to keep the system running.

Ministers are increasingly alarmed by the cost of so-called 'wasted wind', caused by building additional windfarms before Britain's electricity grid had been updated to cope. The National Energy System Operator has already admitted that the cost of disconnecting wind turbines will reach £9billion by 2029, adding up to £100 to domestic energy bills. In February, a record amount of solar power was among more than 200 new renewables projects awarded contracts to generate electricity.

The latest auction has secured a record 4.9 gigawatts of solar power, including West Burton solar farm, a nationally significant infrastructure project and the largest solar farm to win a government renewables contract, on the site of a former coal-fired power station in Nottinghamshire. Onshore solar schemes have been agreed at a price of £65.23 per megawatt hour while new onshore wind has been secured at £72.24 per megawatt hour. The Government said the prices were under half the £147 per megawatt hour that analysis shows building and operating new gas power stations would cost.

Contracts were awarded to 1.3 gigawatts of onshore wind, including Imerys Wind Farm in Cornwall, which is the largest onshore wind project to be successful in England in a decade, after a de facto ban on the technology was lifted by the Labour government.