1. Policy updates on the contract for difference
Feb 2016
1 December 2016

2. OBJECTIVES OF THE CFD AUCTION
What the CFD Auction is designed to do:
Secure investment in a renewables generation;
Introduce price competition between projects, and to some extent between technologies; and
Select the cheapest projects, first and foremost.
What the CFD Auction is not designed to do:
Find the optimal allocation across all bids;
Optimise the use of budget – large amounts of unspent budget is a possible outcome; and
Prioritise delivery years – the auction may allocate all budget to projects in 1 or 2 years.
Secure point change

3. DRAFT CFD BUDGET FOR SECOND ALLOCATION ROUND
The CFD Budget Release for Second Allocation Round (figures are total support payments available in a given year):
Delivery Year
£M (2011/12 prices)
21/22
22/23
Pot 2 (less established technologies)
290
This government intends to release this budget for the allocation round in April 2017 which will be limited to Pot 2 (less established technologies).
Less Established Technologies
Offshore Wind
Anaerobic Digestion (with or without CHP)
Dedicated biomass with CHP
Tidal Stream
Wave
Geothermal
Advanced Conversion Technologies (with or without CHP)
The budgets set out in this notice are in 2011/12 real prices.
We will inflate the budgets presented here by a CPI inflator to a £2012 price base, before National Grid values the bids (which will be submitted in £2012 values) against the available budget.

4. The draft administrative strike prices in this allocation round are:
STRIKE PRICES FOR SECOND ALLOCATION ROUND
The draft administrative strike prices in this allocation round are:
Technology
2021/22
2022/23
Offshore wind
105
100
Advanced Conversion Technologies (with or without CHP)
125
115
Anaerobic Digestion (with or without CHP) (>5MW)
140
135
Dedicated Biomass with CHP
Wave
310
300
Tidal Stream
295
Geothermal -
This will help to ensure good value for money for consumers.
[We expect competition to drive clearing prices even lower]
They have been set to enable the cheapest 19% of projects within each technology to compete in the Second allocation round.
Call for Evidence for Fuelled techs and Geothermal will end 20 December. We will publish the geothermal strike price as soon as possible and at least 10 days before the next CFD round.
* No strike price has yet been set for geothermal – a call for evidence is open seeking further information on costs before a strike price is published ahead of the round opening.

5. OTHER ALLOCATION ROUND PARAMETERS
For the second round a cumulative maximum of 150 MW (equivalent to £70M budget) will be applied in respect of all the fuelled technologies. A call for evidence is open until 20th December seeking views on their treatment in the CFD scheme in the 3rd/4th rounds.
The call for evidence also seeks further information on geothermal project costs to inform development of the strike price for this technology, which will be published ahead of the round opening.
There will be no minima applied to the second allocation round.
We do not intend to extend the minimum for wave and tidal stream because costs remain high as a result of their early development stage.
However, wave and tidal stream projects are still eligible to compete in the allocation round.
A maxima and minima may be used for a future allocation round to represent good value for money for consumers.
[The wave and tidal minima set out the in EMR Delivery Plan covered the period to 2018/19]
The budgets set out in this notice are in 2011/12 real prices.
We will inflate the budgets presented here by a CPI inflator to a £2012 price base, before National Grid values the bids (which will be submitted in £2012 values) against the available budget.

6. CALL FOR EVIDENCE ON FUELLED TECHNOLOGIES AND GEOTHERMAL
The Department is currently considering how the CFD treats these technologies for the following allocation rounds planned for this Parliament. These rounds are expected to commit up to a further £440m per year for 15 years of consumers’ money to deliver low carbon electricity through the 2020s and in the years beyond.
The areas for consideration are biomass conversion, how future cost reduction potential is influenced, cost effective decarbonisation of electricity generation, the interactions between heat and electricity and how the Department supports Advanced Conversion Technologies (ACT).
Further information is also being sought to improve the evidence base for a geothermal strike price.
The Call for Evidence on Fuelled techs and geothermal in the CFD ends on 20 December.
The £730m includes the £290m for the Second allocation round

7. CONSULTATION ON NON MAINLAND GB ONSHORE WIND PROJECTS
The Government is seeking views on whether non-mainland
GB onshore wind projects should be classified as a
separate technology and allowed access to Pot 2 or
whether it should continue to be treated as onshore wind. 
Map of great britain (wind and eigg)
Why does it print in white?

8. SUPPLY CHAIN GUIDANCE
The Supply Chain Plan Guidance is relevant to low carbon electricity projects greater than or equal to 300MW generating capacity
Each Supply Chain Plan will be assessed using a scoring system for the three criteria: innovation, competition and skills
Plans that meet the minimum criteria will receive a Supply Chain Plan certificate needed to participate in the CFD auction
Application
Maturity
Milestones
Procurement
Strategy
Size of project
Ownership Structure
Innovation
Skills
Competition
As mentioned the scoring criteria are Innovation, Competition and Skills.
Applications should where applicable to set out:
the maturity of the project
a supply chain project plan that shows project milestones
depending on the procurement strategy and how progressed that procurement strategy is at the time of application, this might include key decision dates and details of identified barriers or challenges facing existing companies and new entrants to the market
size of project (expressed in installed capacity MW)
ownership structure.
The Dept. will be assessing whether the SCP sets out sufficient evidence that the project will support the development of innovation, competition and skills across the industrial supply chain supporting the relevant low carbon electricity sector see para of the guidance
The Dept will asses whether a SCP sets out sufficient evidence that the project will support the development of innovation, competition and skills across the industrial supply chain supporting the relevant low carbon electricity sector.
A maximum score of 100 will be awarded to each of the three key criteria. These scores will then be aggregated (to a combined maximum of 300) to create a final score, which will be presented as a percentage. The ‘pass mark’ final score for Supply Chain Plans is 50%. All plans that gain a 50% or higher final score will be accepted.
In exceptional cases, the Secretary of State may also approve a project that has scored extremely highly in certain criteria but does not achieve the required overall pass mark. This would happen if the Department is nevertheless satisfied that if the plan is implemented it will make a material contribution to the development of innovation, competition and skills across the industrial supply chain supporting the relevant low carbon electricity sector.
see paras of the guidance
Put into comp, innovation etc (like…)

9. UPDATE SINCE LAST ROUND
Changes to the Guidance
We have made a few minor, technical changes including -
We intend to monitor the implementation of approved plans, and may request and publish a Post Build Report
We ask that applicants who have been awarded a CFD in a previous allocation round to provide an update regarding previously approved plans
Simplified scoring
Further examples on what an applicant may wish to set out in order to demonstrate the degree to which the project will support the development of innovation, competition and skills across the relevant supply chain
Procedural Changes
Applicants will be invited to upload their Supply Chain Plan onto a secure online document management platform during the Supply Chain Application Window.
Supply Chain Plans will not be assessed until the Application Window closes at 5pm on 13 January In cases where Applicants upload more than one version of any Supply Chain Plan, only the latest upload will be considered.
All communications regarding the Supply Chain process should be made via and the Supply Chain Guidance provides full details on submitting a plan and scoring criteria.
- the department intends to monitor implementation of approved plans
- the department may request and publish Post Build Report
Applicants who have been awarded a CFD in a previous allocation round should provide an update regarding the implementation of the Supply Chain Plan submitted in connection with that project (provided that no Post Build Report has yet been delivered). The Secretary of State may take into account an applicant’s failure to provide an update in relation to the implementation of a previously approved Supply Chain Plan when considering any subsequent Supply Chain Plan submitted by that Applicant (or any consortium of which that Applicant is a member).
suggest 'may wish to set out in order to demonstrate the degree to which the project will support the development of innovation, competition and skills across the relevant supply chain'

10. SUPPLY CHAIN ASSESSMENT TIMETABLE
9 November Final Guidance Document published
January 2017– Supply Chain Application Window
January 2017
SUPPLY CHAIN ASSESSMENT TIMETABLE
Plans are assessed
Applicants submitting Supply Chain Plans are required to do so between 9 and 13 January 2017.
BEIS will endeavour to assess all plans received during the Supply Chain Application Window within 30 working days.
Plans that are incomplete or are thought to be borderline may take longer to process.
We will accept revised plans received by 10th March 2017 but we can make no guarantees that they will be assessed in time for the opening of the round.
February 2017
24 February
Applicants who have not received a response by this date should contact BEIS
10 March 2017
Deadline for revised plans
April 2017
3 April CFD application window opens
21 April CFD application window closes

11. Any Questions?

12. INTERLEAVING RULES
The allocation framework sets out the rules and process by which the CFDs are allocated to applicants.
The most significant change for this round is the new interleaving rule.
Previously, a flexible bid was only considered if it was next in the bid stack after a failed bid for the same project, in other words if there was no interleaving bid between the bids.
This was known as the ‘no interleaving rule’.
In this round we will extend the range of situations in which flexible bids are considered, even in situations where interleaving bids are present.
Where the interleaving bids fall within the budget, the bids must be provisionally accepted by the Delivery Body.
Where the interleaving bid is a maximum bid and falls within the maximum budget and the overall budget the bid must be provisionally accepted by the Delivery Body.
In this situation, the flexible bid would only be accepted if the interleaving bids were also affordable to preserve the fairness principle.
No flexible bid was successful in the first allocation round, and we understand that participants have tended to group their bids to within very small price differentials to ensure their flexible bids are considered. Inserted
Early evidence from the auction evaluation work indicates that the current rules on flexible bidding could be improved to achieve better value for money outcomes.
Under current rules, the presence of an interleaving bid leads to the closure of the delivery year.
The proposal is to extend the range of situations in which flexible bids are considered, by allowing flexible bids to be considered even in situations where interleaving bids are present. In this situation, the flexible bid would only be accepted if the interleaving bids were also affordable to preserve the fairness principle.

13. Scenario 1: Interleaving bids AND flexible bid are affordable
£0m
£290m
£250m
Bids received for delivery in 2021/22 and / or 2022/23 stacked from the cheapest bid by price
Budget used up by bids
A-F represent bids from different projects
D1 and D2 are flexible bids from the same project
D1 has breached the budget so D2 is considered after considering the interleaving bid E
E is within the budget and is provisionally accepted
D2 is within the budget so both E and D2 are accepted and the auction continues.
F breaches the budget. D2 sets the strike price.
Therefore in this scenario, the auction would close at £285m
£285m

14. Scenario 2: Interleaving bids are affordable, but flexible bid is not
A-F represent bids from different projects
D1 and D2 are flexible bids from the same project
D1 has breached the budget so D2 is considered after considering the interleaving bids E&F.
E & F are within budget and are provisionally accepted
D2 breaches the budget so E, F and D2 are rejected. C sets the strike price.
Therefore in this scenario, the auction would close at £250m D1 D2 C B A F E
£0m
£290m
£250m
Bids received for delivery in 2021/22 and / or 2022/23 stacked from the cheapest bid by price
Budget used up by bids
The paper uses the phrase ‘confirmed rejected’ for C1 and B1 but they are not removed from stack so “not accepted” might be better
C1 and B1 not accepted since a more expensive project in the same delivery year might be accepted, violating the fairness principle

15. Any Questions?