The UK government has confirmed two amendments to its Contracts for Difference (CfD) scheme ahead of the next annual auction round, Allocation Round 7 (AR7), due to open in 2025.
Under the first, repowering onshore wind projects will be allowed to participate in CfD auctions provided they meet certain eligibility criteria.
Under the second, the phased CfD policy currently available for fixed-based offshore wind developments will be extended to floating offshore wind (FLOW) projects.
Allowing repowering projects to participate means that onshore wind farms nearing the end of their initial operational life will be able to apply for CfDs.
This is expected to help operators to carry out repowering while these projects are still operating and allow ageing wind farms to keep contributing to renewable power generation while minimising disruption to supply.
The government said it would not require repowering projects to retain their previous capacity for the next allocation round. It acknowledged that most developers would have commercial incentives to maximise capacity but also that in certain cases they may have barriers against doing so.
The government said it would continue to explore the need for a requirement to “at least” retain capacity for future CfD rounds.
FLOW extension
The extension of phasing to FLOW projects, meanwhile, is expected to help de-risk construction that involves emerging floating technologies by offering the flexibility to build new projects in multiple stages.
The government said it would initially apply the current rules for fixed-bottom offshore wind to FLOW, including capping the overall capacity of phased projects at 1.5GW.
Other rules currently in place for fixed-bottom projects include requirements that the project be built in no more than three phases and that at least 25% of the total project capacity is constructed and commissioned in the first phase.
Applying the same rules to FLOW is expected to ensure smooth implementation during AR7.
At the same time, the government opted not to pursue the introduction of a pre-qualification process, nor to amend the grounds for appeal ahead of AR7. Instead, the government said it intended to implement a fixed timeline for appeals from 2026 onwards.
Consultations
The amendments come after a consultation on these proposals and certain longer-term considerations was held by the previous government from January to March 2024.
A total of 72 responses to the consultation were received, including from renewable electricity developers and associated supply chain firms, trade associations, suppliers, not-for-profit and public campaign groups and investment bodies.
Some of the longer-term considerations explored in the consultation for future auction rounds beyond AR7 included the development of a long-term definition for FLOW projects, clarifying how hybrid metering would be treated in the wider system before implementing it in the CfD and enhancing support for projects connecting to multi-purpose interconnectors.
The government said it would continue considering how best to approach these policy areas. It also said it was maintaining full CfD indexation to the Consumer Price Index (CPI) to remain competitive globally, as this approach continued to offer comparatively advantageous terms.
Clean energy pledges
While the amendments to the CfD process mark a continuation of work that was already underway, they also come as the new Labour government works on its pledge to turn the UK into a “clean energy superpower,” including targets of doubling onshore wind, tripling solar power and quadrupling offshore wind by 2030.
The CfD scheme is the government’s main support mechanism for low-carbon power generation projects and is thus seen as key to incentivising private sector investment in, among others, wind and solar power.
In a statement, RenewableUK’s head of strategic communications, Nathan Bennett, described the amendments as being “undoubtedly in the interest of billpayers and energy security”.
Enabling repowered onshore wind projects to bid for CfDs would “ensure that we don’t lose vital generating capacity in the coming years,” he added.
He also described the extension of CfDs to FLOW projects as a positive move that would “provide greater flexibility” for these projects to be developed “at a pace that maximises their cost-competitiveness”.
However, Bennett also called for reforms to bring forward the next round of test and development projects as soon as possible.
“These projects should be used to encourage the development of UK supply chains in floating wind, enabling us to scale up and deliver floating wind faster in the coming years,” he said.
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