Notice

Lynemouth Power Station: signature of low-carbon dispatchable Contract for Difference (LCD CfD) - summary

Published 9 July 2026

Key terms

The key terms of the LCD CfD are as follows:

Duration

The contract will run from 1 April 2027 to 31 March 2031.

This arrangement will commence on the day after existing support arrangements conclude and be limited to four years in duration.

Strike price

£154/MWh in 2024 prices (£110.46/MWh in 2012 prices).

Generation collar

The contract includes a ‘generation collar’ that caps the annual load factor eligible for subsidy at 27%.

There is also a minimum winter generation floor, ensuring the system and consumers can rely on Lynemouth’s presence.

The terms of the new contract are projected to halve the subsidy Lynemouth will receive over the contract period compared to the current support mechanism.

Excess Returns Mechanism on profits

Should Lynemouth make higher than anticipated profits, a profit clawback mechanism is in place to protect the consumer, with lower and upper threshold rates of 30% and 60%. This will guarantee a much fairer deal for consumers than in the past.

Enhanced sustainability criteria

The CfD substantially tightens sustainability criteria, including:

• an increase in the proportion of biomass that must be sustainably sourced from 70% to 100%
• a reduction in the supply chain emission threshold from 55.6 gCO2e/MJ to 36.6 gCO2e/MJ (aligned with international best practice, as set out in the EU’s RED III standard)
• provisions to exclude material harvested in primary forest and old growth areas from receiving support payments

Robust contract compliance arrangements

Should Lynemouth not comply with the sustainability criteria, then subsidy payments for electricity generated from whole consignments of biomass can be withheld, and there is a termination right for repeated breaches of those requirements. We have also expanded the Low Carbon Contracts Company’s (LCCC) powers to conduct audits and review Lynemouth’s supply chain to identify issues early and ensure action is taken.

Detailed contract terms

Full contract terms and conditions will be published shortly on LCCC’s website.

Overview

Following our response to the consultation on supporting large-scale biomass generators when existing support ends in 2027, we have been progressing negotiations with Lynemouth Power Station in Northumberland.

As set out in the announcement of the Heads of Terms agreement in February, we have now signed the low-carbon dispatchable Contract for Difference with Lynemouth. In coming to this decision, we have carefully considered the value of large-scale biomass generation to the system in the short term, analysed the costs of support compared to alternatives, and ensured that the contract delivers robust sustainability standards.

We do not consider subsidised unabated biomass generation to be the long-term solution to the UK’s energy needs. Announcing the contract with a clear end point gives notice that we won’t be extending subsidy to Lynemouth to run unabated after 2031. This gives workers and the company time to plan for an alternative use of the site, ensuring that valuable expertise remains available to support the green transition and future economic growth.

Supporting dispatchable generation at Lynemouth for another four years will support energy security, lower costs and retain up to 300 skilled jobs at the plant and at the Port of Tyne.