UK Contracts for Difference - Stakeholder Bulletin

• United Kingdom

• Energy and infrastructure - Clean energy

10-02-2022

The UK Government has announced that it will hold Contracts for Difference (“CfD”) allocation rounds on an annual basis from March 2023, when the next round – allocation round 5 – will commence. The CfD scheme is the Government’s flagship programme to support the deployment of low-cost renewable electricity generation in the UK. Previously, CfD allocation rounds have been held every two years, with the most recent round opening to applications in December 2021. The Government’s decision follows the outcome of an internal review of the frequency of CfD auctions, which the Government agreed to undertake as part of its Net Zero Strategy.

Simon Davies, Principal Associate at Eversheds Sutherland comments: “The move to annual allocation rounds has been requested by the industry throughout recent CfD consultation processes and this decision has therefore been roundly welcomed. The Government’s commitment to conduct annual allocation rounds provides a stable timetable for project developers, investors and other stakeholders, making it easier to take investment decisions and incentivise faster deployment under the CfD scheme. It also benefits projects that have shorter construction lead times, which may have been discouraged from applying under previous allocation rounds due to the two year gap between rounds. Stakeholders would also welcome more long term certainty on monetary and capacity budgets for future CfD rounds, so it remains to be seen whether the Government will also adjust its approach in this respect”