The government has confirmed a budget of £285 million for the fourth allocation round of the Contracts for Difference (CfD) scheme.
Details of the budget are set out in a final Budget Notice (PDF, 233KB) and accompanying note (PDF, 129KB), which the government published on 25 November 2021 alongside several other statutory notices and documents required to launch the fourth allocation round (AR4).
AR4 will open to applications on 13 December 2021. It is set to be the largest CfD allocation round yet – aiming to secure more renewable electricity capacity than the last three rounds combined.
A draft Budget Notice for AR4 was published in September 2021. This final Budget Notice includes an additional £20 million of budget, which has been ringfenced for tidal stream projects.
Key budget details
- £200 million has been allocated to offshore wind projects, reflecting the Prime Minister’s commitment to have 40GW of offshore wind capacity by 2030.
- £75 million has been allocated to emerging technologies, with £24 million ringfenced for floating offshore wind projects and £20 million ringfenced for tidal stream projects.
- £10 million has been allocated to established technologies, such as solar and onshore wind, with capacity from these technologies capped at 5GW.
Other statutory notices
Alongside the final Budget Notice, the government has published four other statutory notices relating to AR4. Details of these notices are provided below:
- Allocation Round Notice (PDF, 174KB) – This notice confirms that the CfD application window for AR4 will open on 13 December 2021 and close on 14 January 2022.
- Standard Terms Notice (PDF, 237KB) – This notice sets out the information that must be used by the CfD counterparty, the Low Carbon Contracts Company (LCCC), to complete the appropriate Standard Terms (CfD contract), which is individualised for each successful project.
- Counterparty Costs Notice (PDF, 130KB) – CfD applicants may apply to LCCC to request ‘minor and necessary’ modifications to the CfD contract. This notice sets out the threshold above which the costs likely to be incurred by LCCC as a result of any modification would not be considered ‘minor’.
- Allocation Framework Notice (PDF, 135KB) – This notice sets out the applicable Allocation Framework for AR4 (see below).
Final Allocation Framework
The final Allocation Framework for AR4 was published on 25 November 2021.
This document sets out the rules for the round and the eligibility requirements that applicants must satisfy.
A draft version of the document was published in September 2021. There are no substantial changes between the draft and final versions affecting the operation of AR4.
Consultation response and final contract documents
The government response to the October 2021 consultation on further changes to the CfD contract was also published on 25 November 2021.
The response confirms the government’s decision to make several additional amendments to the CfD Standard Terms and Conditions, primarily to reflect the UK’s departure from the EU.
The response also confirms that an alternative strike price adjustment formula has been inserted into the CfD contract to account for the possible decision by Ofgem that generators should no longer pay Balancing Services Use of System charges.
In conjunction with the consultation response, the government has published final versions of the contract documents for AR4, comprising the Standard Terms and Conditions, the generic CfD Agreement and contract variants.