Six UK offshore wind projects pass CfD milestone

In: Windfarms

Low Carbon Contracts Company (LCCC) has announced that six projects, representing 5.5 GW of offshore wind capacity, have now passed their Milestone Requirement (MR).

Low Carbon Contracts Company (LCCC) is the designated CfD Counterparty to Contracts for Difference (CfDs) and Investment Contracts awarded to generators under the government’s CfD scheme. The projects were awarded Contracts for Difference (CfD) in the third Allocation Round of the scheme (AR3), as announced in October 2019. They include Dogger Bank A, Dogger Bank B, Dogger Bank C, Sofia, Seagreen, Forthwind.

The MR is the first significant milestone in a CfD project’s journey to becoming operational, as it requires generators to demonstrate their commitment to delivering the project by incurring actual spend equal to 10% of the expected development and construction costs; or by evidencing project commitments, including that financing is in place for the project and contracts are entered into for the manufacture and installation of material equipment for the generation and export of electricity.

The projects are due to come online in the mid-2020s, and, once operational, are expected to generate around 23.9TWh of low-carbon electricity annually – enough to power over 8 million homes.

As well as providing guidance and support on the normal contractual demands of the MR, LCCC helped AR3 project teams to navigate uncertainties, including COVID-19 and a Judicial Review (JR), by applying contractual Force Majeure provisions where appropriate. The flexibility afforded by the CfD contract allowed LCCC to grant all the AR3 projects a six-month extension to their Milestone Delivery Date (MDD) in respect of the JR. LCCC granted extensions to the MDD for the four remote island wind projects facing grid connection delays. Two projects, Bulwell and Small Heath, were unable to achieve the MR by the MDD and their CfD contracts have consequently been terminated.

Neil McDermott, LCCC Chief Executive, said: “Allocation Round 3 projects faced challenges on an unprecedented scale due to the impacts of a Judicial Review, uncertainty around EU Exit, and the global pandemic. I’m incredibly proud to see these projects pass this important milestone and I commend the determination and teamwork that went into achieving it.”

“The projects include some of the world’s largest offshore wind farms to date, so this outcome demonstrates the CfD’s vital role in supporting new low-carbon power projects to secure investment and, ultimately, in developing the ambitious infrastructure we need to power the UK’s transition to Net Zero emissions by 2050.”

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