To open in late 2021, the fourth round of the Contracts for Difference (CfD) scheme will aim to double the capacity of renewable energy compared to the last round and expand the number of technologies supported, with offshore wind, onshore wind, solar, tidal and floating offshore wind projects all eligible to bid.
This will be coupled with a new consultation looking at the supply chain and ways to support more jobs and private investment by increasing the competitiveness of UK manufacturers.
Energy Minister Kwasi Kwarteng commented on the announcement: “The UK is a world leader in clean energy, with over a third of our electricity now coming from renewables.
“That huge achievement is thanks to the government’s Contracts for Difference scheme.
“The new plans set out today build on the Prime Minister’s Ten Point Plan and put us firmly on the path towards building a new, green industrial revolution.”
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.
The CfD scheme is the Government’s primary method of supporting low-carbon electricity, encouraging investment in renewable energy by providing projects with a stable income, while protecting consumers from paying increased costs when electricity prices are high.
Contracts are awarded in a series of competitive auctions, known as allocation rounds, which have been run every two years. In the auction process, the lowest price bids are successful.
The fourth round aims to increase the capacity of renewable energy from the 5.8GW achieved in the last round to up to 12GW, which could be enough to power 20 million electric cars on the UK’s roads in any year.
Given its long-term potential to support the country’s 2050 net zero target, offshore wind projects will compete in their own ‘pot’ in the next auction process rather than against other technologies as they have previously.
Last year’s third round delivered record-low prices and secured enough clean energy to power over 7 million homes.
Floating offshore wind projects will be able to bid for contracts for the first time, allowing wind farms to be built further away from the shoreline where it is windiest and increasing the UK’s renewable energy capacity even further.
And as announced in March, solar and onshore wind projects will be able to bid for the first time since 2015, coupled with a commitment to update guidance for new onshore wind schemes in England.
Former coal-burning power stations that have been converted to biomass generation will be excluded from future CfD rounds.
RenewableUK’s Chief Executive Hugh McNeal commented on the announcement: “Next year’s renewable power auctions can unlock over £20bn of new investment in the economy and secure an unprecedented amount of low cost, clean electricity for consumers using the full range of renewable technologies we have available.
“As one of our lowest cost, large scale power options, onshore wind has a vital role to play in meeting the challenge of net zero and the re-opening of CfD auctions is an important step to ramp up investment in this key technology.
“The new structure for clean power auctions, with a dedicated pot for offshore wind, can deliver the scale needed for our 40 gigawatt 2030 target as well as providing support for innovative marine and floating wind technologies.
“The industry is investing to develop a vibrant, competitive UK supply chain. We look forward to working with Government on the details of how reforms to Supply Chain Plans can support this.”
Following the first consultation on the fourth CfD round, the Government has also announced a second consultation on new proposals for the Supply Chain Plan.
The proposals are designed to increase the clarity, ambition and measurability of commitments made by renewable project developers when they bid for contracts in the CfD scheme, and to introduce new measures if they subsequently fail to deliver on those commitments.
The government also invites views on several proposed drafting changes to the CfD contract on the following policies:
- floating offshore wind
- negative pricing
- coal-to-biomass conversions
- milestone delivery date
- minor and technical changes to improve the operation and clarity of the contract
In addition, the government is inviting views on the government’s proposal not to extend phasing to floating offshore wind projects.
This consultation closes at
More information about this consultation and how to take part is available on the government website.