What are the latest Contracts for Difference (CfD) results, and what does this mean for renewable developers?
What is the scheme and how has it evolved?
The CfD scheme is the UK government's investment initiative designed to support low carbon electricity generation and accelerate the country's progress towards achieving net zero.
It sets out contracts between the Low Carbon Contracts Company (LCCC), a government owned-company, and renewable developers. If developers meet the criteria and secure a successful bid during the auction rounds, their renewable project will receive a fixed rate (that is indexed) for the electricity produced over a 15-year period, where revenues will be topped up should wholesale market prices fall below the strike price and paid back to the LCCC should it be above. This means developers have predictability and increased revenue certainty for their generation.
Several changes have been made to the scheme, aimed at accelerating key milestones for clean power by 2030. This is a pivotal time for the renewable energy industry, echoed by the government significantly boosting the AR6 budget by over 50% to £1.56 billion. The results of this auction, announced on 3 September, mark a critical step forward.
So, what are the latest results?
We’re pleased to see a record amount of renewable energy projects awarded contracts in the latest auction round, demonstrating a step change in pace and prioritisation of funding from the government towards making additional renewable energy generation available.
With 131 projects securing contracts, totalling 9.6GW of new renewable capacity, this auction outcome will play a crucial role in achieving the government’s ambitious 2030 targets and helping Britain achieve net zero.
Key highlights include:
- Largest auction to date – this auction is the biggest yet, surpassing the previous five rounds, and including a record breaking 93 solar contracts awarded.
- Return of offshore wind – there have been 9 contracts awarded, including the two largest offshore wind farms in Europe. This is great to see after no offshore wind contracts were awarded in the previous round. Notably, 7 of the 9 projects had taken Permitted Reductions of up to 25% on capacity awarded in previous auction rounds, with the aim to improve investment cases in response to rising costs.
- Projects agreed below upper limit on the set price – each technology has cleared below the Administrative Strike Prices, demonstrating a competitive auction process.
- Higher clearing prices – prices cleared above the previous auction round levels, highlighting increased costs faced by developers in recent years.
- Emerging technologies securing contracts – it's exciting to see emerging and innovative technologies gaining traction, including the largest floating offshore wind project in the world, and six tidal stream projects all securing contracts.
What comes next?
It's great to see the auction round has been successful for many developers of renewable projects. Following the results, developers will have now received a formal notification from the LCCC for final consideration before contracts are issued.
Alternative routes to market
For unsuccessful bidders, there are alternative routes to market available. Key factors that will need to be considered in determining the optimal alternative route to market include the price, timeframes, complexity, and creditworthiness. This could include reapplying for the next auction round (AR7) or exploring Corporate PPAs, where long term certainty is required.
Corporate PPAs offer a powerful alternative solution, through allowing businesses to procure energy from a renewable site at an agreed fixed price. They enable new sites to be built that otherwise wouldn’t be possible without government subsidies. There are many benefits for project developers, including financial certainty and the confidence to take a final investment decision on the new renewable site which is supported by the CPPA. Learn more about how we facilitate CPPAs here.
How EDF can help
We’re the largest offtaker of renewable energy in the Great Britain and our PPA team are market experts in providing routes to market for CfDs, having signed over 10 TWh of annualised volume to date from CfD-backed renewable sites.
For successful bidders, we offer PPAs that deliver the full functionality required for CfD-backed assets, including nomination to the Intermittent Market Reference Price (IMRP) and options for the sale of Renewable Energy Guarantees of Origin certificates (REGOs). There’s also the option of additional services to meet specific needs.
Read an example of how we’re providing a PPA for one of the largest single offshore wind farms in the world, here.
Talk to the experts
Reach out by contacting ppa@edfenergy.com to discuss the auction results, routes to market and how we can help!
