Department for Energy, Security and Net Zero, Contracts for Difference Clean Industry Bonus Scheme, 20/12/2024

• This subsidy scheme provides top-up payments to certain applicants to the Contracts for Difference (CfD) scheme, which aims to help de-risk/accelerate the deployment of low carbon electricity generation, specifically fixed or floating offshore wind facilities, by addressing supply chain issues impacting the construction of projects.
• An initial scheme budget of £27 million per Gigawatt was proposed by the Secretary of State, who has discretion to modify the budget up or down upon sight of the CfD scheme applications.
• Our key takeaways from the Subsidy Advice Unit (SAU) report are:
  • Regarding policy objectives, assessments should focus on a limited number where potential wider benefits are targeted to core objectives, rather than presenting a wide variety where potential wider benefits are not targeted in the selection criteria, and ensure they evidence why all objectives are needed.
  • Assessments should clearly explain whether and how identified issues represent market failures rather than wider market circumstances that lead to unsatisfactory market outcomes.
  • Assessments should make good use of available evidence to clearly set out the counterfactual in relation to each policy objective.
  • Regarding changes in economic behaviour of the beneficiary, assessments should clearly take into account what would have occurred in any event and to the extent that there is a risk that funding is not additional, explain how this risk is minimised and/or why this is unavoidable.
  • When allocating funding via a competitive process, assessments should clearly establish a link between the criteria and the scoring system used to rank bids and allocate funding and the policy objectives of the subsidy or subsidy scheme. Assessments should clearly explain and evidence aspects of the scheme which are intended to ensure funding is proportionate to policy objectives. Also, where this competitive process is a key part of the scheme, assessments should discuss the likely competitiveness of the process.
  • Assessments should undertake evaluation of potential for subsidies or subsidy schemes to distort competition in specific markets by considering key relevant market characteristics to consider which markets are most likely to benefit from the subsidy or subsidy scheme and which will be negatively impacted.
  • Assessments should provide an in-depth and quantitative assessment of the overall scale of positive and negative impact on competition and investment and other sectors to provide a clear conclusion as to why benefits outweigh negative impacts.
  • Where the subsidy or subsidy scheme is assessed against the Energy and Environment Principles, assessments should be clear as to whether the environmental or energy limbs apply, and include a clear statement in accordance with para 4.33 of the Statutory Guidance if applicable.

Find Out More