United Kingdom

United Kingdom

BEIS extends non-delivery provisions on CfDs

UK: Successful bidders for contracts for difference (CfDs) will face more restrictions in future if they fail to deliver their projects, the energy department announced

Dong Energy's Burbo Bank Extension will receive CfD support
Dong Energy's Burbo Bank Extension will receive CfD support

The moves, which were widely supported, follow a consultation by the government in May which proposed strengthening the non-delivery disincentive.

The disincentive was applied to the first CfD allocation round in 2015, with many sites struggling to meet their milestone delivery dates.

It aims to minimise the risks of non-delivery by asking successful bidders to sign contracts as soon as possible and to make their best efforts to meet the milestone delivery date.

Currently, developers failing to sign a CfD before the offer lapses or that have had their CfDs terminated for failing to meet the project milestone specified at 13 months are temporarily excluded from entering the same site into the first of any further CfD rounds in the period.

Under the new rules, this exclusion period will almost double to 24 months. This is necessary to ensure the exclusion rules take account of auctions being less frequent than originally envisaged, said BEIS.

A further change ensures that the non-delivery provisions exclude sites where CfDs terminate before the first 13 months milestone delivery date are up, and where the site fails to achieve the stages of delivery up to the milestone delivery date.

The amendments also exempt a site from exclusions from further auctions under the non-delivery disincentive "where a CfD terminates due to a sustainability change in law".

But the department of business, energy and industrial strategy (BEIS) rejected suggestions by consultees that an environmental eligibility check should be carried out before CfD allocation.

It also rejected extending protection for sites against a force majeure event such as prolonged judicial review, since this is already covered in CfD policy.

The response defines a site affected by the non-delivery provisions as that which hosts the main generating structures referred to in the CfD rather than the whole of the eligible generating station.

Where an extension to an existing site has won a CfD, the non-delivery exclusions apply only to this extension, not to the whole site, it says.

A new round of CfD auctions was announced in this year's spring budget, backed up by up to £730 million (€800 million) funding.

The aim was to help to reduce high levels of investor uncertainty post-2020, which was aggravated by policy roll-backs last year.

To enable these post-2020 auctions, which run up to March 2026, the government extended the delivery period for CfDs from 31 March 2020 to 31 March 2026. But timetables for these further auctions remain unclear.

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