UK launches consultation for Contracts for Difference proposed changes

The UK Government through the Department for Business, Environment, and Industrial Strategy (BEIS) are set to launch a consultation that seeks views on a number of proposed changes to the Contracts for Difference (CfD) scheme to ensure it continues to support low carbon electricity generation at the lowest possible cost to consumers.

CfDs incentivise investment in renewable energy by providing developers of projects with high upfront costs and long lifetimes with direct protection from volatile wholesale prices, and they protect consumers from paying increased support costs when electricity prices are high.

The consultation proposes changes to the CfDscheme that would, if implemented, apply to contracts awarded through future allocation rounds, the next of which is planned to open in 2021 subject to any required state aid approval of planned changes. The proposed changes relate to (i) delivering the UK’s 2050 net-zero emissions target, (ii) bioenergy, (iii) allocation round design, (iv) improving the operation of the CfD, and (v) supporting a smart, flexible system. 

The consultation also invites views on some minor potential changes to the Contracts for Difference (Allocation) Regulations 2014 to further improve their operation and clarity.

An Impact Assessment has been published alongside the consultation to provide an assessment of the costs and benefits of the key aspects of these changes should they be implemented.

The consultation will close on May 22, 2020.