CfD Changes
Following consultation with industry, the UK government has confirmed changes to the Contracts for Difference (CfD) scheme ahead of Allocation Round 8 (AR8).
The reforms aim to simplify the allocation process, provide applicants with more flexibility, and improve the administration of future auctions.
One of the key changes for AR8 is that the National Energy System Operator (NESO), as the CfD delivery body, will be permitted to rectify certain administrative errors during the application assessment process.
Developers whose projects are initially deemed non-qualifying will also be permitted to submit additional documentation during Tier 1 appeals under certain conditions. These changes follow feedback from the industry, which emphasised the importance of avoiding the exclusion of projects due to minor administrative issues.
The government has also confirmed the CfD price base that will apply for AR8. Administrative strike prices will continue to be expressed in terms of 2024 prices. The main technology caps will be set at £113/MWh for offshore wind, £271/MWh for floating offshore wind, £92/MWh for onshore wind and £75/MWh for solar photovoltaic projects.
These figures represent the maximum strike prices available at auction. Developers will compete by submitting bids below these levels. Successful projects will receive a CfD payment based on their awarded strike price, which will be adjusted for inflation over the contract period.
The government’s consultation response confirmed that the CfD price methodology will be updated for AR8 to provide greater clarity and consistency for developers. The strike prices will continue to be indexed through the CfD contract mechanism, enabling support payments to reflect inflationary changes while providing investors with certainty.
. Under the reformed connection process, projects progress through different stages, known as ‘Gates’. A Gate 1 agreement secures an initial place in the connection queue, but does not offer the same level of certainty regarding delivery timing and network capacity.
Consequently, projects with only a Gate 1 connection agreement are generally not eligible for AR8, unless they have a Gate 1 Connection Point and Capacity Reservation (CPCR), which secures their connection location and capacity.
Projects with a Gate 2 connection agreement represent a more advanced stage of the connection process and have greater certainty around delivery; these projects will remain eligible to apply.
This change is intended to ensure that projects supported through the CfD scheme have a realistic pathway to connecting to the grid.
These legislative changes will be introduced through amendments to the Contracts for Difference (Allocation) Regulations 2014, and the updated contract documents will reflect the revised AR8 rules.
According to the UK government, the changes are intended to maintain a competitive auction process while improving clarity and efficiency for renewable energy developers.
