CfD Stakeholder Bulletin — 24 November 2020
Summary
Government confirms major changes to CfD scheme for Allocation Round 4, including a third offshore wind pot, administrative strike price for floating offshore wind, and extension of negative pricing rule to stop payments when day-ahead prices go negative. Coal-to-biomass conversion projects are excluded from future rounds. Second consultation runs until 18 January 2021 on implementation details.
Why it matters
The negative pricing extension transfers market risk from consumers to generators — CfD holders now bear the cost of negative prices rather than receiving guaranteed payments regardless of market conditions. The floating offshore wind administrative strike price creates a separate technology class, potentially reducing cross-subsidy from established offshore wind. Supply chain plan strengthening adds regulatory burden without pricing the underlying constraint on domestic manufacturing capacity.
Key facts
- •Third offshore wind pot created for AR4
- •Floating offshore wind gets separate administrative strike price
- •Negative pricing rule extended — no CfD payments when day-ahead prices negative
- •Coal-to-biomass conversions excluded from future rounds
- •Second consultation closes 18 January 2021
Timeline
Areas affected
Related programmes
Memo
Contracts for Difference: Stakeholder Bulletin 24 November 2020 Publication of AR4 government response and second consultation The government has today published a government response to the March 2020 consultation on proposed amendments to the Contracts for Difference (CfD) for Low Carbon Electricity Generation scheme. It confirms the government’s decision on implementing a series of amendments to the CfD scheme ahead of Allocation Round 4, including: • Introduction of a third, offshore wind pot in next year's allocation round • Updates to the 2014 Community Benefits and Engagement Guidance for Onshore Wind • Introduction of separation definition and administrative strike price for floating offshore wind projects • Exclusion of coal-to-biomass conversion projects from future CfD allocation rounds • Extension of the negative pricing rule for future CfD contracts so that CfD generators are not paid when 'day ahead' electricity market prices are negative • Strengthening the existing Supply Chain Plan process • Introduction of a series of further, technical changes to the operation of CfD allocation rounds Alongside the government response document, the government has also published an accompanying Impact Assessment, providing an indicative assessment of the costs and benefits of key proposals to be implemented. In addition, the government has also published a further consultation on changes to Supply Chain Plan process as well as the CfD contract. This consultation invites views on: • More detailed changes to the Supply Chain Plan Policy, which are designed to increase the clarity, ambition and measurability of developers’ commitments, and ensure those commitments are delivered • Several proposed drafting changes to the CfD contract to implement decisions taken on floating offshore wind, negative pricing, coal-to-biomass conversions and Milestone Delivery Date • Several minor and technical changes to improve the operation and clarity of the contract • Government’s proposal not to extend phasing to floating offshore wind projects The consultation will run for 8 weeks and will close on 18 January 2021. The following documents are also published alongside this consultation and we welcome views on these: • Drafts of the CfD Agreement and Standard Terms and Conditions showing the proposed changes underlined and highlighted in colour • Draft Supply Chain Plan Guidance Readers are strongly recommended to read the consultation in conjunction with the government response. As ever, we welcome responses on any part of this consultation. Please respond online at: https://beisgovuk.citizenspace.com/clean-electricity/cfd-supply-chain-plans-and-contract or email to BEISContractsforDifference@beis.gov.uk. General Data Protection Regulation This stakeholder bulletin is being circulated to people who have opted in to the Contract for Difference stakeholder contact list. We issue these stakeholder bulletins as a convenience to interested parties, however it is not in any way essential to be on this list to participate in major consultations or allocation rounds. Purpose & scope of this list: This list is managed by the Department for Business, Energy and Industrial Strategy (BEIS) (and any successor departments) and will be used to inform interested parties of policy developments relevant to the Contract for Difference scheme for renewable energy projects (and any direct successor schemes). It is not used for any other purposes. To be removed from the circulation list: Please send a blank e-mail with the subject ‘opt out’ (if the receiving e-mail you use is different to the one you send the e-mail from, include that e-mail address in the subject of the e-mail) to BEISContractsForDifference@beis.gov.uk. If you have received this indirectly and want to be added to this list: Send a blank e-mail with the subject line ‘opt in’ to BEISContractsForDifference@beis.gov.uk. You can withdraw your consent to opt in at any time. We will normally keep your address on this list until you: a) withdraw your consent to opt in, b) the scheme closes without any successor, c) we receive reports your email address is no longer operational, or d) you do not respond to a periodic request from us to reconfirm your desire to opt in.