Policy paper

Electricity Market Reform: Contracts for Difference

How Contracts for Difference (CfDs) will work under Electricity Market Reform.

Documents

Contract for Difference: Draft Allocation Framework (10 April 2014)

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Contract for Difference: Draft Allocation Framework - addendum (10 April 2014)

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Contract for Difference: Allocation Process High Level Process (08 April 2014)

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Draft Allocation Framework Feedback Template (08 April 2014)

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Update on Terms for Contracts for Difference (Dec 2013)

CfD Agreement (Dec 2013)

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CfD Contract Terms and Conditions (Dec 2013)

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Feedback form

Electricity Market Reform Draft Contract for Difference

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Contract length analysis for Feed-in Tariff with Contracts for Difference

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Letter: Update on Contract for Difference allocation

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Slides from the Draft Allocation Framework stakeholder event: 9 April 2014

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Detail

Draft Allocation Framework (08 April 2014)

We have published a high level summary of the Allocation process alongside a draft of the Allocation Framework. The high level summary document describes the allocation process, in particular the intended interaction between what will become (once approved by Parliament) the Contracts for Difference (Allocation) Regulations 2014 and the Allocation Framework. The draft Allocation Framework sets out, amongst other things, the detail of the application and CFD offer processes including the eligibility and qualification assessment, detailed auction rules and the valuation formula – matters which will be required by the Contracts for Difference (Allocation) Regulations 2014.

The draft Allocation Framework is a working document and is likely to change as work continues to refine the structure and the drafting wherever possible. Further, changes to the drafting may be caused by the revised state aid guidelines which the European Commission is expected to publish shortly. In addition, as work progresses to finalise the Contracts for Difference (Allocation) Regulations 2014 it is possible that drafting changes made in those Regulations will impact on the structure and content of this draft Allocation Framework. Please bear this in mind when considering the draft of the Allocation Framework.

Despite the possibility of the draft Allocation Framework changing, the current draft reflects many of the Department’s stated policy objectives in relation to how auctions will be run when an auction is appropriate. We hope that it serves as a helpful guide for stakeholders who are considering how best to prepare for a future allocation round.

DECC is not seeking views on the underlying policy which is reflected in the draft Allocation Framework as the underlying policy has been the subject of previous consultations with stakeholders. We would, however, welcome stakeholder thoughts on whether the current draft allocation framework accurately implements the stated policy objective for auctions.

We would also welcome stakeholder thoughts on whether any of the concepts or provisions might be ambiguous and benefit from being revised. If stakeholders have any such comments please send us your thoughts using the template provided below by Tuesday 22 April 2014.


Contracts for Difference (19 December 2013)

Contracts for Difference stimulate investment in low-carbon technologies (including renewables, nuclear and Carbon Capture and Storage (CCS)) by providing greater certainty of revenue that will encourage investment by reducing risks to investors and by making it easier and cheaper to secure finance.

The documents published today, 19 December, provide complementary information to the Electricity Market Reform (EMR) Delivery Plan published 19 December and the Electricity Market Reform Strike Prices and Contract Terms published on 4 December 2013. They set out a revised draft of the CfD and explain the changes that we have made since the previous draft was published in August.

Government has engaged extensively with a range of stakeholders on the development and implementation of its policy approach in developing the CfD. This policy will now be implemented through the CfD as set out in the December Draft.

We are aware that in respect of certain clauses that some stakeholders have had limited opportunity to comment on full-form drafting. Therefore stakeholders are invited to provide comments on how the policy has been given effect in the detailed drafting of the following clauses, by 27 January 2014:

  • BSUoS and TLM costs;

  • adjustments for Generation Taxes;

  • Qualifying Shutdown Events;

  • Curtailment

  • Direct Agreement

  • Fuel Measurement and Sampling Procedures

  • Collateral

  • Market Reference Price

We are also seeking comments on our policy for Phasing.

Comments should be sent to emrcfddesign@decc.gsi.gov.uk and be submitted using the template set out in the Contract for Difference: Draft Allocation Framework - addendum (10 April 2014) (PDF, 259KB, 1 page) .

About the documents

This is a revised draft CfD that reflects feedback from a range of stakeholders on the version published in August. Most of the terms are fully drafted.

In this we have provided an explanation of the key elements of the revised draft CfD and highlight where there have been changes since the publication of the draft CfD clauses in August 2013. This document also sets out the Government’s policies on those aspects of the CfD contractual framework which have not yet been published in full-form contractual drafting. In this respect, this document sets out the detailed policy approach to phased offshore wind projects and also explains how the sustainability requirements applying under the Renewables Obligation will be implemented into the CfD.

In the overview document we refer to a feedback template that we require stakeholders to use to provide comments.

Published in August 2013

In this we highlighted the significant policy changes to the approach in the November Operational framework and CfD Heads of Terms, many of which were informed by engagement with industry and other stakeholders.

This is a draft contract spine of a CfD published in August 2013. It is superseded by the revised draft published in December 2013.

The key elements of the detailed allocation process and provided information on its implementation.

This paper reports on the summary conclusions of analysis conducted by DECC to answer the questions:

  • How does the break even Feed-in Tariff with Contracts for Difference (CfD) strike price change with the contract length of the CfD for renewable generating technologies?

  • Which contract length gives the lowest net present value of support payments to generators?

Ways to respond:

Email: emrcfddesign@decc.gsi.gov.uk

Write to: EMR CfD Design and Implementation Team Area 4D Department of Energy & Climate Change Whitehall Place London SW1A 2AW

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