UK sets out draft CfD terms

The UK today published the draft terms of the Contracts for Difference (CfDs) that will underpin its new support regime for large-scale renewable generation.

The CfD is the key mechanism the UK government hopes will unlock up to £110bn ($170bn) of investment, including a huge offshore wind programme.

The draft contract – stretching to almost 200 pages – is likely to give the UK industry’s lawyers busy a month, as the Department of Energy and Climate Change (DECC) set a deadline of 2 September for feedback on the terms.

DECC today confirmed that the standard CfD term for most renewable technologies will be 15 years.

It also reiterated that contracts will initially be allocated on a “first come, first served” basis until 50% of the CfD budget is accounted for – after which point the contracts may be awarded via allocation rounds.

DECC outlined a range of milestones and incentives it hopes will ensure timely delivery of projects.

Changes to the arrangements first mooted in November following industry feedback include a greater flexibility for developers to reduce capacity by up to 30% below the level originally agreed without having their CfD terminated.

There are also fewer "default termination events", which DECC claims give "an appropriate and proportionate approach to contract enforcement" to the CfD counterparty.

Publication of the CfD details follows the unveiling of draft strike prices in June.

Business and energy minister Michael Fallon said: “The key contract terms have been published in detail to provide the energy sector and investment community with further certainty, so they can get on and invest.

“When compared to the existing system of support, the Renewables Obligation, this new support mechanism will make it cheaper to deliver low-carbon generation by around £5bn up to 2030.”

The government expects to publish final CfD terms in December.