Decc plans Contracts for Difference overhaul

Projects looking to secure a Contract for Difference (CfD) could be forced to pay back any other state aid they have received prior to receipt of the subsidy, under a proposed overhaul of the scheme by the Department of Energy and Climate Change (Decc).

They would then be barred from receiving additional state aid for the duration of the contract. Those that did would have their CfD payments suspended until it was returned. Subsidies which could not be returned would be docked from future CfD payments.

The change is being proposed to ensure the scheme is compliant with EU state aid rules. When it was granted approval by the European Commission in 2014 it was on the basis the projects benefitting would not be able to take advantage of any other form of state aid.

Developers are already blocked from securing CfDs if they are receiving support via the Renewables Obligation, the Feed-in Tariff or the capacity market but they are still able to access a number of other forms of state aid.

The Department also suggested clarifying the legal definition in the contracts of “foreseeable changes in law” to ensure neither CfD holders nor the Low Carbon Contracts Company (LCCC) are left out of pocket by legislative and regulatory changes which could not have been predicted.

It similarly proposed a more clearly defined status for energy storage as well as a number of minor technical changes to the contracts.

Decc has launched a consultation on the proposed overhaul which closes on 8 June. It has also put out a call for evidence on further possible changes to CfDs to tackle issues such as speculative bidding and the risk posed to the Levy Control Framework budget by uncertain load factors.

In March the chancellor George Osborne announced that £730 million would be made available for CfD auctions over the course of the current Parliament. £290 million will be available in the first auction, which is due to take place before the end of this year.