Historical analysis of the UK power market with regards to the CfD scheme shows that power prices would be 13 €/MWh higher if all CfD-based capacity was removed, which can be compared to 10 €/MWh of estimated CfD cost for consumers in 2025. Grid carbon intensity in the grid has decreased with 43% since the CfD start, however, this can also be attributed to the decommissioning of coal. Regarding coupling, the UK power prices is still correlated to the gas prices, with 76% coupling in 2025.
The UK scheme proves that the concept works, and it is delivering on the intended goal of rapid build-out of low-carbon capacity, through an ever-evolving auction system. But the current generation-based design insulates contracted generators from market signals, leading to dispatch behaviour that can distort prices and disincentivising participation in the balancing market.
The impact on the Swedish power market from a potential CfD scheme has been evaluated with a market price model. The year 2040 has been studied and it is found that introducing either offshore wind power or new nuclear power has similar potential to lower market prices compared to a reference scenario. Taking the different capture rates into account, the cost of both schemes is similar and lower than the reduction of market prices. Besides the impact on spot prices, several other factors need to be considered. These include the profitability of unsubsidised producers, the potential for adding new demand outtake as well as achieving a balanced long term generation mix.
