The fourth round of the Contracts for Difference (CfD) scheme, which aims to secure 12GW of electricity capacity, has opened for applications today.
Contracts for Difference are 15-year private law contracts between renewable electricity generators and the Low Carbon Contracts Company (LCCC), a government-owned company that manages CfDs at arm’s length from government.
Contracts are awarded in a series of competitive auctions, known as allocation rounds, which have been run approximately every two years. In the auction process, the lowest price bids within each pot and/or ringfence are successful.
Compared to the previous round, the fourth allocation round is open to an expanded number of renewable energy technologies, with offshore wind, onshore wind, solar, tidal and floating offshore wind projects, amongst others, all eligible to bid for funding in the scheme’s auction process.
Business and Energy Secretary Kwasi Kwarteng commented on the announcement: “Our biggest ever renewables auction opening today will solidify the UK’s role as a world-leader in renewable electricity, while backing new, future-proof industries across the country to create new jobs.
“By generating more renewable energy in the UK, we can ensure greater energy independence by moving away from volatile global fossil fuel prices, all while driving down the cost of new energy.”
A total budget of £285 million a year has been allocated to the fourth round, with £200 million available for offshore wind, £75 million for emerging technologies, such as remote island wind, tidal stream and floating offshore wind, and £10 million for established technologies, such as solar and onshore wind.
Within emerging technologies, £24 million a year has been ringfenced for floating offshore wind projects and £20 million initially set aside for tidal stream projects.
Onshore wind and solar are competing in an allocation round for the first time since 2015, and the government is seeking ‘significant capacity’ from these technologies.
Subject to the outcome of the competitive auction, the government expects that the fourth allocation round will be ‘a major step’ towards delivering the government’s increased ambition to have 40GW of offshore wind by 2030, including 1GW to come from floating offshore wind, as set out in the Ten Point Plan for a Green Industrial Revolution.
Key points (£ budgets in 2011/2012 prices):
Pot 1: Established technologies (includes Onshore wind, Solar and Hydro):
- £10 million pot budget
- 5GW capacity cap
- maximum capacity limits of 3.5GW imposed on both onshore wind and solar PV
Pot 2: Less-established technologies (includes Floating Offshore Wind, Tidal Stream, Geothermal and Wave):
- £75 million pot budget
- no capacity cap
- within the £75 million total, £20 million ringfenced funding for tidal stream projects and £24 million initially ringfenced funding for floating offshore wind projects
Pot 3: Offshore wind:
- £200 million pot budget
- no capacity cap
The fourth allocation round will close to applications on 14 January 2022, with the final results of the auction expected to be announced in spring/summer 2022.
More information about the fourth allocation round is available on the LCCC website.