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All contracts signed for UK goverment's Round 4 CfD scheme

By: Tom Russell 03/08/2022 Low Carbon Contracts Company

General Windfarms

All 99 contracts offered through the fourth Allocation Round (AR4) of the UK government’s Contracts for Difference (CfD) scheme have now been signed and returned to Low Carbon Contracts Company (LCCC).

A total of 93 individual projects across Britain will now proceed to work with LCCC to meet the contractual milestones specified in the CfD, supporting projects’ development and the delivery of almost 11GW of energy. The first AR4 projects are due to come online in 2023-24.

According to LCCC, AR4 projects’ total estimated notional monetary budget impact will be less than zero in the first three delivery years, with an increase in 2027-28 matching the steep rise in generation capacity coming online. It outlined that money flows under the CfD are always subject to actual prices at the time of generation, however the AR4 portfolio would return money to the CfD scheme at current market prices.

Given the size and diversity of AR4, LCCC automated the process used to produce, distribute and receive signed contracts. Whilst the manual process used in previous allocation rounds saw 16 contracts produced and returned within ten days in AR3, this year’s process has seen all 99 contracts issued and returned within a shorter time period. With allocation rounds set to occur annually from March 2023, this process will save time and resources for stakeholders across the scheme.

Projects must now pass their Initial Conditions Precedent within twenty working days. This contractual milestone is the first step on CfD projects’ journey to construction and operation.

George Pitt, Chief Financial Officer at LCCC said: “We’re delighted to welcome these projects to the CfD portfolio and can’t wait to get to work, whether that’s with our established CfD partners or new stakeholders. 2022 has been a landmark year for the CfD scheme, and the diversity and scale of AR4 projects proceeding is a huge mark of confidence in it. Amidst unprecedented times, this new generation of power projects stands to benefit communities and businesses across the length and breadth of the country, as well as well as protecting the long-term health of our environment, economies and societies.”

Kwasi Kwarteng, UK Business and Energy Secretary, said: “Our renewable energy auction scheme has been an outstanding success, with the latest round securing enough clean energy to power twelve million British homes and the price of clean energy plummeting even further.

“Getting contracts signed means projects can push on and deliver jobs and opportunities across the country. This will help to secure our homegrown supply of cheaper renewables and bring down the price of energy for millions of British families as we shift away from expensive fossil fuels.”

Several offshore wind farms with a combined capacity of of nearly 7 GW are among the winning projects. With an overall budget of £295 million, the fourth round saw £210 million allocated to the pot supporting offshore wind projects, and a further £24 million for floating offshore wind projects. It also saw the per unit (MWh) price of offshore wind secured in this round reach £37.35/MWh, almost 70% less than that secured in the first allocation round in 2015.

The winning projects included the 1080 MW Inch Cape (Phase 1), 1372 MW EA3 (Phase 1), 1396MW Norfolk Boreas (Phase 1), 2852 MW and Hornsea Project Three offshore wind farms. Moray West was also successful in securing a CfD for 294 MW. All the aforementioned projects were awarded CfDs at a strike Price of £37.35/MWh with delivery set for 2026/27.

The TwinHub Floating Offshore Wind Project was also named winner with a strike price of £87.30/MWh for delivery 2026/27. It is the first floating wind farm in the UK to secure a CfD.

For more information on offshore wind farms worldwide, click here.

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All contracts signed for UK goverment's Round 4 CfD scheme

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