Final allocation framework for Contracts for Difference

22nd September 2014

On 1 September the Department of Energy and Climate Change (DECC) published the final Allocation Framework for the October 2014 Contracts for Difference (CfD) allocation round. This is the final piece of the jigsaw for generators of renewable electricity and sets out all the information needed in order to submit a bid.

The Framework covers:

Eligibility requirements

These are set out in Schedule 4 and restate the requirements of the Contracts for Difference (Allocation) Regulations 2014 but go on to specify what documentary evidence the Delivery Body will require to show that the requirements are met. These include a copy of all applicable planning consents and a copy of the grid connection agreement securing at least 75 per cent of the initial installed capacity estimate.

Valuation of applications

The method of calculating the value of applications is in Schedule 2. 2014 applications will be valued at 2012 prices.

Allocation process

The Framework sets out the steps that the Delivery Body will go through to determine whether or not the value of all applications exceeds the total budget / pot / minimum / maximum (as applicable). If it does, then a sealed bid auction will apply.

Auctions

If there is to be a sealed bid auction, then applicants are invited to submit sealed bids containing the proposed Strike Price (not exceeding the Administrative Strike Price), the Target Commissioning Date and start date of its Target Commissioning Window, and the capacity of the plant.

Applicants can also submit up to ten flexible bids, with varying Strike Prices, (lower) capacities and/or (longer) Target Commissioning Dates. If the original bid is unsuccessful, the Delivery Body will then turn to these flexible bids and evaluate those in order of lowest to highest Strike Price. This is good news for generators, who can submit a number of alternatives for if their original (ideal) bid is rejected; it is not an all or nothing application.

Comment

The final Allocation Framework fleshes out the various Regulations governing the CfD regime with more detail. The first round commences on 14 October with a closing date for applications of 27 October 2014. We will not however know for certain what the budget is for this first round until 29 September, but it is likely to be that indicated in the draft budget published on 24 July, that is, £50 million for the established technologies and £155 million for the less established technologies.