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When is the next allocation round?

Low Carbon Contracts Company is working with DECC and National Grid in preparation for the next allocation round. We expect a further announcement from the Government in relation to the next round later this year.

In March 2016 Government announced information in relation to the next allocation round for Contracts for Difference (CFDs) including:
Up to £730million (per year for each year of 15 year contracts) this Parliament for offshore wind and other less established technologies
£290 million of annual support for the first auction allocated for the next CFD auction
Support for offshore wind will be capped initially at £105/MWh (2011-12 prices) falling to £85/MWh for projects commissioning by 2026.

How many CFDs have signed following the first Allocation Round?

A total of 25 projects signed 27 CFDs under the first Allocation Round. 1 of the 25 projects is a phased CFD comprising of 3 phases, each of which has its own CFD.

Will any of the changes that have been made to the Allocation Round 2 CFD apply to Allocation Round 1 contracts?

Changes and updates incorporated into the Allocation Round 2 CFD templates do not automatically apply to existing CFD holders. There are mechanisms within the existing Allocation Round 1 CFDs (and Investment Contracts) for making contractual amendments, as there are within the Allocation Round 2 templates.  LCCC will consider whether any of the changes made to the Allocation Round 2 CFD templates would be suitable amendments to make to the Allocation Round 1 CFDs (and Investment Contracts) under the contractual change procedures that are set out in the CFD (or Investment Contract). 

What changes have been made to the CfD since the first Allocation Round?

There have been a number of changes to the CfD since the first Allocation Round. Broadly, these changes:

  • allow unincorporated Joint Ventures to enter into CfDs;

  • prevent payment being due for any period of six or more consecutive hours where the Intermittent Market Reference Price (the GB Day Ahead Hourly Price) is negative;

  • exclude the costs of the OFTO from the 10% spend Milestone Requirement;

  • require the Generator to warrant that it is not facing pending, threatened or actual litigation;

  • amend the original FMS and Sustainability arrangements to account for changes to the FMS and Sustainability arrangements under the RO;

  • amend to the Metering Operational Framework and Technical System Requirements for the Private Network CfD to ensure they refer to the most up to date industry standards; and

Clarify what the BM Unit Metered Volume is expected to comprise.BEIS have also consulted on a number of changes to the CfD for the second Allocation Round, including in relation to the cumulation of state aid, definition of Foreseeable Change in Law and electricity storage.  BEIS will publish its consultation response in due course and following that a revised version of the CfD including the relevant changes will be published.

How will the CFD Register be maintained?

LCCC will keep the CFD Register up to date and publicly accessible on its website. Information relating to new CFDs entered into under future allocation rounds will be added to the CFD Register.

What are the ICPs?

Please refer to the Contract Management Process tab under the Generators section. Here is an example letter that was sent to the Generators who were allocated a CFD in the 2014 allocation round.

What are the key activities LCCC is responsible for?

As the designated counterparty to CFDs, LCCC is responsible for entering into and managing CFDs throughout their term. LCCC is also responsible for forecasting CFD payments to generators and setting the supplier obligation levy that funds them. LCCC is responsible for the settlement of amounts payable by and to generators and suppliers and outsources this work to EMR Settlement Ltd. LCCC also engages with delivery partners in particular in relation to forthcoming CFD allocation rounds. LCCC also manages the administration and operation process for the Electricity Settlements Company Ltd (ESC).

What happens if I am awarded a CfD?

A: At the end of an Allocation Round, the EMR delivery body (National Grid) notifies LCCC of the names of the successful applicants and LCCC is required to offer a contract based on standard terms and incorporating the project specific data submitted by the Generator at application stage. The contract will be issued to the Generator within 10 Working Days of the date that National Grid notifies LCCC of the details of the Generators to be offered CfD contracts. The Generator must sign and return the contract to LCCC within 10 Working Days of receipt, otherwise the offer lapses.   By signing the CfD, the Generator confirms certain matters are true, accurate and not misleading as at the date of the CfD including amongst other things:

  • that it is it is duly formed and validly exists as a legal entity in accordance with the laws of the jurisdiction in which it is incorporated;

  • that it has the power to enter into the CfD and perform its obligations under it;

  • that the obligations which the CfD places on it are legal, valid and enforceable;

  • that all of the Required Authorisations have been obtained and are in full force and effect;

  • that no litigation has been instigated against the Generator or, as far as the Generator is aware, threatened against the Generator;

  • that the electricity generated by the Facility will throughout the Term of the CfD contribute to a reduction in emissions of Greenhouse Gases; and

  • that entry into, delivery and performance of the CfD by the Generator does not conflict with:

  1. its constitutional documents;

  2. any Law or Directive which applies to the Generator;

  3. any Required Authorisations; or

  4. any agreement or instrument, such as a contract with another party, which is binding upon the Generator or any of its assets.