Department for Energy Security and Net Zero, Contracts for Difference for Renewables (CfD) scheme

  • This is the second referral of the CfD scheme, following an initial referral in February 2023.
  • The value of the AR6 section of the Scheme is unknown – DESNZ explained that estimates are highly uncertain as actual payments will depend on market wholesale prices at the time and how much electricity each project generates. As an indication, the estimated total subsidy amount for AR4 was £15 billion and for AR5 it was £5 billion, though the estimated total subsidy amount for AR6 may be lower or higher than these figures.
  • The purpose of the Scheme is to encourage low carbon energy generation. The Scheme is the latest round of the Contracts for Difference for Renewables (CfD) Scheme: the sixth allocation round (AR6).
  • Our key takeaways from the Subsidy Advice Unit (SAU) report are:
    • If your Scheme has been subject to an SAU evaluation in the past, ensure to show that you have taken into account the finding of this investigation when producing any subsequent Assessments.
    • In relation to minimising distortions, ensure to identify aspects of your Scheme which are relevant to limiting the subsidy to the amount necessary, and limiting the scope for over-compensation. Underlying evidence of this could include internal decision-making documents and analysis.
    • Ensure to consolidate your report into one document for ease of reading and clarity, and signpost throughout.
    • Ensure to use up-to-date evidence to back up your evidence.
    • In relation to Principle E, provide thorough discussions of alternative policy levers, particularly those considered at the start of the Scheme (if it is a historic one) to the extent they are still relevant.
    • Systematically evaluate market characteristics and the effects on competition or investment, as envisaged by the Statutory Guidance.

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Posted in Subsidy Advice Report Tracker.