Department for Energy Security and Net Zero, Low-Carbon Dispatchable Contracts for Difference

This Department for Energy Security and Net Zero, Low-Carbon Dispatchable Contracts for Difference subsidy supports the generation of electricity which is produced by Drax power station from biomass.

It is a variable top-up payment in the form of a Contract for Difference for a period of four years with about £470 million being provided per year. It is capped to a maximum load factor of 27% (the ratio of average electricity produced by Drax across the year compared to its maximum capacity).

Our key takeaways from the Subsidy Advice Unit (SAU) report are:

• Conclusions should be supported by and refer to relevant evidence throughout.
• Assessments should clearly articulate the specific policy objectives of the subsidy and consider this consistently at each step.
• Explanation, supported by evidence, should be provided on the counterfactual and what the beneficiary would do without the subsidy.
• Assessments should provide details on the contractual arrangements, its performance requirements and the means of enforcing these where relevant (for example in relation to obtaining materials from sustainable sources).
• Where eligibility criteria were set out at a consultation phase, an explanation should be provided to explain how this would minimise distortion impacts on competition.
• When undertaking the balancing exercise, only the benefits which relate to the specific policy objectives identified under Step 1 and all negative impacts should be considered. Following this it should be clarified how it was concluded that benefits outweigh negative effects.
• Clear statements should be included where required which explain how the subsidy will not relieve the recipient from any liabilities it has under the laws of England, Wales, Scotland and Northern Ireland (for example as a polluter).

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