OFFICIAL
LAUNCHING THE SECOND
CONTRACTS FOR DIFFERENCE
ALLOCATION ROUND
16 March 2017
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Content
• What was published on 13 March?
• Response to Call for Evidence on Geothermal in the CFD
• Allocation Framework
• Contract changes
• What else you need to know for this round
• Further potential changes
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13 March Publications
• The CFD Standard Terms and Conditions and Agreements
• Explanation of changes to the CFD Standard Terms
• Standard Terms Notice
• Allocation Round Notice
• Counterparty Costs Notice
• Allocation Framework Notice
• Budget Notice and Accompanying note
• The Allocation Framework for this round
• Government Response – Call for Evidence on Geothermal in the CFD
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Response to Call for Evidence on
Geothermal in the CFD
• We issued a call for evidence on fuelled technologies and geothermal which
closed in December. The responses were used to inform the administrative
strike price that we have now set for geothermal at £140/MWh for both
delivery years of this round.
• We used the same methodology as that employed for all the other
technologies as set out in the CFD strike price setting methodology paper
published last year. This targets 19% of the supply curve.
• The wider response to the call for evidence on the fuelled technologies will
be published in due course.
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Allocation Framework
• This version is largely the same as that used by National Grid in the previous
round, with the only significant addition being of new rules to deal with
governing the interleaving bids process in the auction.
• These new rules are intended to encourage developers to submit larger
capacity bids at a lower price where they are able to do so, along with one
for less capacity as a fall back if their larger bid does not fit within the budget.
• National Grid will go into more detail and explain how the auction works in
practice.
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Contract Start Date
• The earliest start date for contracts has been updated to April 1st 2021,
in line with the beginning of the first Delivery Year.
• Generators may commission in advance of this date and begin selling
their electricity on the open market, but may not receive CFD payments
until this date.
• Generators can still set their Target Commissioning Window start date
up to a year in advance of their Target Commissioning Date.
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CFD Contract Changes - overview
• We consulted on changes to the CFD contract in 2015 and 2016.
• Government responses are available on gov.uk
2015: https://www.gov.uk/government/consultations/electricity-marketreform-contracts-for-difference-consultation-on-changes-to-the-cfdcontract-cfd-regulations
2016: https://www.gov.uk/government/publications/contracts-for-differencestandard-terms-and-conditions-version-2-march-2017
• We have incorporated the changes from both consultations into the CFD
contract for the second allocation round.
• The key changes are summarised in the following slides.
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CFD Contract Changes – 2016
consultation
State and EU Aid
• To prevent overcompensation by the cumulation of aid.
• To bring the CFD scheme into line with our EU state aid clearance.
Definition of Foreseeable Change in Law
• Clarifying this definition within the definition of qualifying change in law.
• Principally to clarify what situations are ‘foreseeable’ and do not result in
compensation to generators.
Storage
• Clarifying how storage should be treated in CFD sites while ensuring that
CFD payments cannot be made on electricity imported from the grid.
A number of minor and technical changes to reduce administrative burden.
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CFD Contract Changes - 2015
Negative pricing:
•
Revisions to prevent generation payment for any period of six or more consecutive
hours where the pricing is negative, to comply with EU State aid requirements.
Private Network Agreement
•
Amendments to the Private Network Metering Operational Framework and Technical
System Requirements to ensure reference to the most relevant industry standards,
and
•
Provide generators with greater flexibility in how they maintain their metering systems.
Unincorporated Joint Ventures
•
Confirmation that UJVs will be able to enter into CFDs and publication of a new UJV
Agreement.
Minor and technical amendments, including on milestone delivery requirements,
representations and warranties and fuel measuring and sampling.
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What else you need to know for
this round
CHP
•
Our expectation is that applicants identify as being ‘with CHP’ to the extent that their
intention is to operate as a CHP plant throughout the period during which they will be
eligible to receive CFD support payments. However, applicants are strongly
encouraged to take note of the CHP specific contract terms when making this
determination.
CHPQA
•
The most recent update (Issue 6) was published in December 2015 and will apply to
any CHP plants that are successful in the next Allocation Round. GN44 values
provided for in CHPQA Issue 6 will be used to calculate the CHPQ multiplier in respect
of the AR2 contracts.
•
The Contracts for Difference (Definition of Eligible Generator) Regulations 2014 were
amended in January 2017 by the Combined Heat and Power Quality Assurance
Regulations 2016 to require eligible CHP generators to intend establish a generating
station which complies with CHPQA Issue 6 rather than CHPQA Issue 5.
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What else you need to know for this round
State Aid Transparency Requirements
• The UK is subject to certain transparency obligations contained in the Energy
and Environment Guidelines 2014 (the EEAG), on the basis of which the
European Commission first approved the CFD scheme in 2014.
• In order to comply with those obligations the UK will publish details of aid
granted to individual CFD generators on the European Commission’s state
aid transparency website, which is available to the public. Those details,
including the total amount of aid granted, will be updated annually.
• The transparency obligation applies in respect of all aid granted under CFDs
awarded in the second and subsequent CFD allocation rounds.
• A link to the update can be found at:
https://www.gov.uk/government/groups/contracts-for-difference-cfd-scheme
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Further Potential Changes
• Contracts entered into in round 2 may require amendment to incorporate a
number of additional changes
• UK needs to transpose the EU Directive on Indirect Land Use Change by
10th September 2017, This requires:
• a change to GHG standards from the use of bioliquids;
• minor amendments in the calculation of annualised carbon stock and;
• a change to the definition of ‘waste’ and the addition of certain definitions
in support of a new EU reporting obligation.
• BEIS will consult shortly on changes to the Renewables Obligation.
• We are exploring options for incorporating requirements into the CFD, and
will consult on any specific proposals.
• Adjustment to the Transmission Loss Multiplier to reflect changes in the
Balancing and Settlement Code which implement CMA remedy for localised
transmission losses.
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Any Questions?
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