BEIS Look To Closing CfD Loophole

By Paul Homewood


Net Zero Watch has been warning for months now of how newly commissioned wind farms are refusing to take up their Contracts for Difference, and are instead selling power at much higher market prices.

Finally BEIS seems to have woken up:


From Current +:




On Monday, the Department of Business, Energy and Industrial Strategy (BEIS) launched a new consultation into key changes to the upcoming Contracts for Difference (CfD) Allocation Round 5 (AR5).

Key to this consultation, is looking to clarify how the flexibility in the contract for generator to delay their CfD start date should and shouldn’t be used.

This follows reports that the Moray East Offshore Wind Farm delayed taking up its CfD – which it won in the 2017 auction – earlier this year in order to benefit from the high wholesale electricity prices.

At the time, research from Cornwall Insight suggested there was a "significant commercial incentive" for delaying the CfD, with strike prices for offshore wind in 2017’s Allocation Round 2 being set at £73.71/MWh and £94.81/MWh (both prices in current money).

By comparison, the Intermittent Market Reference Price (IMRP), which is used to determine CfD payments in each hour for offshore wind farms, averaged £187.42/MWh since the start of 2022 up to 14 May.

Of the 3,190 hourly periods from the start of the year to 14 May, the IMRP has been higher than £73.71/MWh in 3,072 (96%) and higher than £94.81/MWh in 2,892 (91%) of them, highlighting the opportunity of delaying a CfD.

BEIS called on generators to act “fairly” in response to Moray East Offshore Wind’s decision to wait to take up its CfD in order to benefit from high wholesale prices in the short term.

The first point in the new consultation seems to look to alter the regulation of the CfD’s to avoid similar situations going forwards.


This is the key part of the consultation:


It’s called shutting the stable door after the horse has bolted, as there are many more wind farms on the old contracts which are still under construction. It will be several years before any new applicants under the new contract conditions will come to market.

BEIS now want the new contracts to stipulate that the CfD start date must be no later than 10 days after the start of commercial operation, instead of anytime up to the Longstop Date, the legal term for the date when a contract must be completed. But it remains to be seen whether generators can be forced to take up their options even then, which is the real issue.


December 23, 2022 at 06:50AM

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