Users of this website should read the FAQ disclaimer at the foot of this page. Please click here to access the FAQ disclaimer
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.
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.
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).
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.
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.
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).
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:
its constitutional documents;
any Law or Directive which applies to the Generator;
any Required Authorisations; or
any agreement or instrument, such as a contract with another party, which is binding upon the Generator or any of its assets.
These frequently asked questions and responses (“FAQs”) have been prepared by Low Carbon Contracts Company Ltd ("LCCC") in response to queries raised by stakeholders in relation to the content of the Contract for Difference (“CFD”), which is comprised of the CFD Agreement and CFD Standard Terms and Conditions (“Conditions”), as published by the Department of Energy & Climate Change on 29 August 2014. The FAQs are also applicable to Investment Contracts (“ICs”) but users of this website are advised to fully review the equivalent clauses in their ICs as there are differences between the CFD and the IC.
These FAQs are subject to and are provided on the basis of the following:
- The FAQs do not supersede or replace the provisions of the CFD or IC and are not intended to and do not constitute legal, investment, commercial or operational advice and should not be relied upon as such. Users of this website should not place reliance upon these FAQs and should refer to the full terms of the CFD or IC, and/or consult their professional advisors where they require information or advice on matters relating to the CFDs or ICs generally and/or any CFD or IC to which they are a party.
- The FAQs reflect the current thinking and approach of LCCC and should not be viewed as in any way as binding on LCCC.
- It is our intention to keep the FAQs under review and to publish revised issues from time to time.
Defined terms used in the FAQs but not defined therein have the meanings prescribed to them in the CFD or IC (as applicable) and the Energy Act 2013.