The Government has confirmed a budget of over £1 billion for Allocation Round 6 (AR6) of the Contracts for Difference (CfD) scheme.

The budget was announced as part of the Chancellor’s Spring Budget this afternoon.

It is the largest budget to be set for a CfD allocation round and will help to ensure that the scheme continues to support delivery of the UK’s ambitious decarbonisation commitments.

CfDs are awarded in annual auctions where the lowest-priced bids are successful. The budget is set to help support effective competition in the auction, with the aim of delivering low-carbon electricity at low cost to the consumer and encouraging investment in emerging technologies.

In accelerating the rollout of new clean power, the CfD scheme plays a critical role in bolstering energy security and protecting households and businesses from volatile global gas prices.

Following the Chancellor’s statement, the Government published a Budget Notice for AR6 (PDF, 253KB) and an accompanying note (PDF, 208KB). 

Key budget details

The Budget Notice sets out that the overall budget will be £1,025m – with £120m allocated to established technologies, such as solar and onshore wind (Pot 1); £105m allocated to emerging technologies, such as floating offshore wind and geothermal (Pot 2); and £800m allocated to offshore wind (Pot 3).

The Pot 1 budget of £120m includes monetary maxima for onshore wind, solar and remote island wind of £120m each. The Pot 2 budget of £105m includes an £8m monetary maximum for geothermal and ringfenced support (a monetary minimum) of £10m for tidal stream projects. The Pot 3 budget of £800m includes monetary maxima for ‘permitted reduction’ and new offshore wind projects of £800m each.

The pot minima and maxima have been implemented to protect competition and value for money, considering the high degree of variation between renewable technologies in terms of cost, scale and size of project pipeline.   

Budgets are presented in 2011/2012 prices in line with convention of the scheme and to enable comparison across rounds. These figures are an estimate of annual support in the most expensive year in the first four years, across all three auction pots, following deployment. Actual annual figures will vary over the lifetime of the contract depending on future wholesale electricity prices and outcomes of the competitive auction process. See the Budget Notice and accompanying note (linked above) for more details.

Other statutory notices

Alongside the Budget Notice, the Government has published other statutory notices relating to AR6. These are as follows:

  • Allocation Round Notice (PDF, 197KB) – This notice confirms that the CfD application window for AR6 will open on 27 March 2024 and close on 19 April 2024.
  • Standard Terms Notice (PDF, 210KB) – 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, 157KB) – 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’.
  • Framework Notice (PDF, 184KB) – This notice sets out the applicable Allocation Framework for AR6 (see below).

Allocation Framework

The Government has published the final Allocation Framework for AR6 today, which sets out the rules and eligibility requirements for the round.

In relation to the budget, the Allocation Framework also sets out the reference prices and load factors used in the valuation formula (see Schedules 2 and 3).

Contract documents set to be published

The final contract documents for AR6 will be published alongside the Government response to the contract changes consultation on 13 March 2024.