Contracts for Difference (CfD): Allocation Round 4

July 7, 2021

The next Contracts for Difference (CfD) auction will begin in December, the Department for Business, Energy and Industrial Strategy (BEIS) has confirmed.

By confirming that the round won’t take place until December, BEIS hopes to “provide further clarity to prospective participants” it said.

The announcement was made alongside the release of the government’s response to the changes to Supply Chain Plans and the CfD contract, which it launched in November 2020. This confirmed the decision to bring forward the assessment of a developer’s delivery of its supply chain commitments to shortly after a project’s Milestone Delivery Date.

Additionally, it confirmed that new powers in legislation will be given to the Secretary of State to assess a Supply Chain Implementation Statement, and either pass or refuse it. It also confirmed the introduction of a new Operational Condition Precedent, which has the potential for a CfD contract to be terminated if the Statement isn’t provided by a Low Carbon Contracts Company.

These latest supply chain proposals set out “challenging new demands for project developers” said RenewableUK’s deputy chief executive Melanie Onn, adding that it’s “vital” that guidance is clear on how the contribution towards job creation, skills development and fostering innovation in the supply chain is demonstrated.

“Project developers are already working with manufacturers to help them understand our projects’ needs and timelines, which will support investment in new facilities and the development of new skills in our workforce.

“Underpinning all this, we need large volumes of new capacity in the next CfD auction for new contracts to generate clean power to keep us on track for our 2030 target, quadrupling what we’ve already installed”.

It’s hoped the CfD round will double renewable energy capacity compared with the last round, expanding technologies including offshore wind, onshore wind, solar, tidal and floating offshore wind. The response from BEIS additionally confirmed that phasing will not be extended to floating offshore wind.

Round four will be particularly significant as established ‘Pot One’ technologies including solar PV and onshore wind will be able to bid in, with BEIS targeting support for 12 GW of new renewable capacity. In November, the government confirmed that the negative pricing rule for projects would be extended, however it is consulting further on potential amendments for energy storage and system flexibility.