DECC to make CfD changes

Department of Energy and Climate Change (Photo: flickr/Steph Gray)

UK Department for Energy and Climate Change (DECC) plans to undertake minor amendments to the Contracts for Difference (CfD) regulations to enable future allocation rounds for renewable energy projects.

DECC has launched consultations on an amendment to the 2014 CfD regulations that extends the delivery years specified in those regulations from 2020 until 2026.

As announced in the 2016 Budget, the UK government intends to auction up to £730 million of support under the CfD framework for offshore wind and other less established renewable generation technologies for projects commissioning in the period 2021-2026.

“We therefore propose to extend Delivery Years to cover the period up to March 31, 2026, and are seeking your views on this proposal. If we did not make this amendment, we would be unable to open up allocation rounds for delivery years after March 31, 2020,” DECC said.

A CfD is a private law contract between a low carbon electricity generator and the CfD counterparty, the Low Carbon Contracts Company (LCCC), which is an independently operated government-owned company.

Under a CfD a generator is paid the difference between the strike price, a price for electricity reflecting the cost of investing in a particular low carbon technology, and the reference price, a measure of the average market price for electricity in the market of Great Britain.

Where the reference price is above the strike price the generator will pay the difference back to the LCCC, according to DECC.

The costs of CfDs are met by electricity consumers via the supplier obligation, which is a levy on electricity suppliers in Great Britain.

The consultation closes on August 8, 2016.

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