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<p>The concept of baseload refers to generation that operates continually throughout
the year. As electricity demand varies widely from day to night and by season, there
is a limit to the need for baseload generation which is less than the summer minimum
demand. Baseload generation brings both benefits and costs to the system relative
to generation that is designed to operate more flexibly or is intermittent.</p><p>
</p><p>The electricity system already has many features that reward different types
of generation depending on the demands of the system. When considering value for money,
Government considers whole electricity system impacts. This includes the benefits
of baseload generation relative to other technologies, and the cost of it not being
able to increase or decrease output rapidly and of procuring reserve capacity to cover
the risk of failure.</p><p> </p><p>The Capacity Market is at the heart of the Government’s
plans for a reliable energy system; it secures the capacity required to meet peak
demand through auctions held four and one year ahead of delivery. It supports technically
reliable existing plant to remain in the market and, as coal and other ageing plant
retire, it will strengthen incentives for new plant to be financed and built.</p><p>
</p><p>The Contracts for Difference scheme allocates support using a competitive auction
process to projects with the lowest price bids, which drives efficiency and cost reduction.
The scheme has been a success in delivering substantial new investment and helping
to deliver significant reductions in the costs of some renewable technologies. We
keep it under review in order to ensure it continues to operate effectively and deliver
value for money to the consumer.</p><p> </p>
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