Hogan Lovell OffshoreBook 2023 230809 OnlinePDF - Flipbook - Page 288
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United Kingdom
led bid’. There have been 3 CfD auctions
to date (in 2015, 2017 and 2019), which
have seen a range of different renewable
technologies competing directly against
each other for a contract. The next CfD
auction opened in December 2021 and
the results are scheduled to be declared
in 2022.
Successful developers of renewable
projects enter into a private law contract
with the Low Carbon Contracts Company (LCCC), a government-owned company. Developers are paid a flat (indexed)
rate for the electricity they produce over
a 15-year period; the difference between
the ‘strike price’ (a price for electricity
reflecting the cost of investing in a
particular low carbon technology) and
the ‘reference price’ (a measure of the
average market price for electricity in the
GB market).
CfDs provide price stability by converting the risk of the variable price of the
wind project’s energy output to a fixed
price (‘strike price’). A payment is made
to the generator by the counterparty
when the market price becomes lower
than the agreed strike price and the
generator pays the counterparty when
the market prices goes above the agreed
strike price.
(b) Investment Contracts
Investment Contracts are an early form
of bespoke and bilaterally negotiated CfD
support awarded by the UK Government
to 5 offshore wind farms and three other
renewable electricity projects in 2014.
(c) Renewable Obligation Certificates
(ROCs)
The Renewables Obligation (RO) was the
main support mechanism for large-scale
renewable electricity projects including
offshore wind in the UK prior to the CfD
and Investment Contracts.
The RO came into effect in 2002 in England and Wales, and Scotland, followed
by Northern Ireland in 2005, but closed
to new generating capacity on 31 March
2017, subject to certain specified grace
periods. It places an obligation on UK
electricity suppliers to source an increasing proportion of the electricity they
supply from renewable sources.
Under the RO scheme, operators of accredited renewable generating stations
are issued with Renewable Obligation
Certificates (ROCs) for the eligible renewable electricity they generate.
Accredited offshore wind generating
stations receive 20 years of ROC support
(known as ROC banding) as follows:
• 1.5 ROCs for projects accredited from
July 2006 – March 2010
• 2.0 ROCs for projects accredited from
April 2010 – March 2015
• 1.9 ROCs for projects accredited from
April 2015 – March 2016
• 1.8 ROCs for projects accredited from
April 2016
