Referral of the proposed Dispatchable Power Agreement (DPA) Business Model subsidy scheme by the Department for Energy Security and Net Zero (DESNZ)
The Subsidy Advice Unit (SAU) has accepted a request for a report providing advice to DESNZ concerning the proposed DPA Business Model subsidy scheme.
Administrative timetable
| Date | Action |
| 1 August 2024 | SAU’s report to be published |
| 4 July 2024 | Deadline for receipt of any third-party submissions (submissions after 5pm on this date cannot be taken into account) |
| 20 June 2024 | Beginning of reporting period |
Request from DESNZ
20 June 2024: The SAU has accepted a request for a report from the Department for Energy Security and Net Zero (DESNZ) in relation to the proposed Dispatchable Power Agreement (DPA) Business Model subsidy scheme. This request relates to a Subsidy Scheme of Particular Interest. .
The SAU will prepare a report, which will provide an evaluation of DESNZ’s assessment of whether the subsidy scheme complies with the subsidy control requirements (Assessment of Compliance). The SAU will complete its report within 30 working days.
Information about the subsidy provided by DESNZ
The Dispatchable Power Agreement (DPA) is a private law contract, based on the renewables contract for difference (CfD), of between 10 and 15 years between a power plant developer and a DPA contract counterparty. The DPA business model has been designed to support Power Carbon Capture, Usage and Storage (CCUS) by incentivising natural gas fired power facilities to install and operate equipment to capture the carbon dioxide (CO₂) produced when generating electricity, for transport to a permanent storage site. The DPA will incentivise power projects to produce low-carbon, mid-merit electricity, meaning plants are only incentivised to turn on when zero carbon sources of generation, such as renewables and nuclear power, are not meeting the needs of the country. Power CCUS can provide non-weather dependent, dispatchable low carbon generation. This will be vital alongside system flexibility and energy storage to support a primarily renewables-based system in 2035.
Government ambitions for CCUS include bringing forward multiple additional power CCUS projects by 2030 to put the UK on track to decarbonise the power sector by 2035. This scheme is the mechanism for awarding DPA subsidies throughout Track 1, Track 1 Expansion and Track 2 of the CCUS Cluster Sequencing Process.
The applications of prospective DPA projects are first assessed against the following criteria to ensure they are eligible for selection:
- located onshore in Great Britain
- have one of the eligible configurations, i.e. must be:
- a natural gas fuelled thermal generation plant; and
- a new build or retrofit plant; and
- one of post-combustion, pre-combustion, or oxy-fuelled combustion
- have a minimum abated capacity of 100MW
- have access to a CO₂ transport solution and CO₂ storage site
Funding for the DPA subsidy payments will be drawn from the electricity supplier obligation levy, a compulsory levy on licensed electricity suppliers to meet the cost of the CfD scheme in accordance with The Contracts for Difference (Electricity Supplier Obligations) Regulations 2014. Obligation payments will be collected from electricity suppliers by the DPA contract counterparty, then relayed to DPA Generators subject to their performance under the terms of the contract.
The DPA has two payment mechanisms, the availability payment, and the variable payment. These subsidy streams also include payment for the DPA generator’s obligations for charges levied for the use of the Transport and Storage (T&S) network.
Availability Payment: paid to the generator on a regular basis, based on the plant’s availability of low carbon generation capacity (regardless of whether the plant is dispatching or not) significantly helps mitigate the uncertainty of the market i.e. the availability of generation from renewables.
Variable Payment: effectively a top-up on the wholesale market price paid on generation output which will cover the costs of running the capture plant i.e. the cost of making generation low carbon); and be calculated on a regular (daily) basis benchmarked against a reference unabated plant.
Information for third parties
If you wish to comment on matters relevant to the SAU’s evaluation of the Assessment of Compliance concerning DESNZ proposed Dispatchable Power Agreement Business Model subsidy scheme, please send your comments before 5pm on the date stipulated in the timetable above. For guidance on representations relevant to the Assessment of Compliance, see the section on reporting period and transparency in the Operation of the subsidy control functions of the Subsidy Advice Unit.
Please send your submissions to sau-ccusdpapower@cma.gov.uk, copying in the public authority at powerccusphase2@energysecurity.gov.uk.
Please also provide a contact address and explain in what capacity you are making the submission (for example, as an individual or a representative of a business or organisation).
Notes to third parties wishing to make a submission
The SAU will only take your submission into account if it can be shared with DESNZ. The SAU will send a copy of your submission to DESNZ together with its report. This is to allow the public authority to take account of the submission in its decision as to whether to grant or modify the subsidy or its assessment. We therefore ask that you provide express consent for your full and unredacted submission to be shared. We also encourage you to share your submission directly with DESNZ using the email address provided above.
The SAU may use the information you provide in its published report. Therefore, you should indicate in your submission whether any specified parts of it are commercially confidential. If the SAU wishes to refer in its published report to material identified as confidential, it will contact you in advance.
For further details on confidentiality of third party submissions, see identifying confidential information in the Operation of the subsidy control functions of the Subsidy Advice Unit.
Contacts
- SAU project team: sau-ccusdpapower@cma.gov.uk
- CMA press team: 020 3738 6460 or press@cma.gov.uk