Auction efficiency, consumer protection, and supporting technological advances

Introduction

This week the Department for Energy Security and Net Zero (DESNZ) announced a record breaking 8.4GW of offshore wind capacity secured through Contracts for Difference (CfD) in Allocation Round 7 (AR7).

Hot on the heels of this European market leading result, the Government’s consultation on proposed changes to the coming Allocation Round 8 for all technologies closes on 30 January 2026. 

There’s still time to get your submission in, but what’s on the table?

Overview of the consultation

DESNZ announced its consultation on proposed refinements for Allocation Round 8 and future auctions alongside proposed amendments to the CfD Agreement and Standard Terms and Condition (which together make up the CfD Contract) on 16 December 2025.

The consultation seeks to keep the Clean Power 2030 mission on track whilst balancing value for money and ensuring CfDs facilitate increasing and faster deployment of clean energy.

The consultation sets out ten proposals, and we cover these in more depth below. In summary, these proposals include:

1. surrendered CfD capacity being no longer eligible for future allocation rounds
2. hybrid metering of CfD and merchant facilities
3. extending the Longstop Date and reducing the Required Installed Capacity of floating offshore wind projects
4. introducing Other Deepwater Offshore Wind as a third wind technology class
5. increasing the efficiency of the scheme through legislative changes
6. removing the default bid concept in favour of no bid is no bid
7. increasing visibility of distribution-connected metering to avoid generators delaying CfD commencement in favour of elevated market conditions
8. excluding projects that are not ready or strategically aligned (Gate 1) from future allocation rounds
9. providing the secretary of state with visibility of anonymised sealed bids to support auction success and budget setting
10. minor technical changes to the CPI inflation factor and the definition of Inside Information.

The consultation also ruled out moving to a single fixed timeline for the bidding, appeal and award process, and away from the five different timelines currently presented. Auctions rounds have historically ended up on the longest timeline but DESNZ felt adopting this as standard would delay project deployment.

How do I respond?

Responses can be submitted online or by email (to [email protected] with ‘CFD consultation on contract amendments’ in the subject line) by 11:59pm on 30 January 2026.

The consultation in deeper depths

Surrendered CfD capacity

DESNZ is proposing to restrict previously surrendered CfD awarded capacity from being bid into AR8 and future allocation rounds.

Generators have been permitted to effectively hand back CfD-awarded capacity before rebidding this capacity into subsequent auctions. Whilst this helped generators potentially improve the economics of their projects, it could also impact the sustainability of the prices bid as well as increasing competition in future rounds.

Hybrid metering

Thanks to technological improvements, hybrid metering is proposed as at the point of generation for multiple CfD facilities of the same technology or CfD and merchant facilities of the same technology reducing the need for separate metering.

The CfD rules have previously required separate metering of CfD and merchant facilities. Hybrid metering is intended to save development costs, add additional capacity, and bring about efficiencies in deployment through shared infrastructure but will require enhanced monitoring therefore increasing administrative costs for generators and the CfD counterparty.

Floating offshore wind

In recognition of future floating offshore wind projects increasing in size and scale, DESNZ is consulting on whether to extend the Longstop Period to 24 months (the latest date by which generation must start to avoid termination of the CfD, previously 12 months) and reduce the Required Installed Capacity to 85% (the minimum percentage of contracted installed capacity required, previously 95%) to bring this in line with fixed-bottom offshore wind.

As floating projects in future allocation rounds may exceed 1GW, this amendment is hoped to derisk construction and support further deployment at scale lowering delivery costs.

A new offshore deepwater foundations technology category

Availability of shallow waters sites for future offshore wind projects is ever reducing, but floating offshore wind is required to be ‘floating’. Given advancements in design, a new category of technology is proposed – Other Deepwater Offshore Wind – to recognise potential future deployment of deepwater offshore wind without floating foundations.

This change is hoped to facilitate this emerging technology to support the carbon reduction targets and open up new areas of the seabed to offshore wind.

Legislative amendments for scheme efficiency

The increasing popularity of CfDs has resulted in a marked rise in applications to the most recent allocation rounds. A higher number of applications potentially gives rise to a higher number of administrative errors both by the applicant and NESO, or non-material errors in information submitted by generators. The errors lead to appeals, which has historically resulted in the allocation rounds running on the longest timelines.

DESNZ is therefore proposing that certain matters such as administrative and non-material errors may be corrected or rectified to reduce the number of appeals, increase qualifying applications and therefore competition in the auction round.

Removal of default bids

Eligible applicants that do not submit a CfD bid in the sealed bid windows are currently assigned a default bid that is aligned with the target dates, capacity and strike price equivalent to the Administrative Strike Price.

DESNZ proposes to remove default bidding given these are unlikely to promote true auction pricing, and allocated default bids are also unlikely to offer value for money or indeed succeed at auction. In future allocation rounds, no bids would be treated as withdrawn bids.

Preventing delayed CfD start dates

Historic market behaviour has shown generators commencing commercial operations prior to official commencement of the CfD contract which has allowed generators to realise benefits of higher market prices prior to the CfD start date. Unilateral Commercial Operations Notices (UCON) were introduced in AR5 by which the Low Carbon Contracts Company (LCCC, as CfD counterparty) could issue notices to bring about commercial operations for the purposes of CfD prior to the intended start date to close off this gap. The LCCC has clear visibility of transmission-connected projects through central metering, but distribution-connected projects are metered by suppliers.

DESNZ intends to strengthen LCCC’s ability to use UCONs by introducing measures for near real-time metering information of distribution-connected projects. Whilst this will increase administrative costs, it is hoped that this will reduce the risk of strategic delays to CfD start dates to realise elevated wholesale prices.

Exclusion of Gate 1 connection agreement projects

NESO’s recent Connection Reforms has targeted removing unviable projects and unlocking ready and strategically aligned projects (Gate 2) to help achieve the Governments’ 2030 Clean Power ambitions. If projects do not meet the readiness or strategic alignment criteria, then these projects are assigned Gate 1 without any commitment or priority for their grid connection.

DESNZ proposes to exclude all Gate 1 projects in favour of Gate 2 projects for both transmission and distribution connections with the aim to sure up deployment and increase realisation of projects awarded a CfD, and increase the quality and thereby value for money of applicant projects in future rounds.

Visibility of sealed bids

In previous allocation rounds, the Secretary of State has been unable to view sealed bids.  DESZ wishes to introduce the ability to see anonymised sealed bids for all technologies to provide greater control through greater visibility and increase successful capacity, inform budget setting and increase the likelihood of capacity being secured at a good price for consumers. This proposal is balanced with the risk of gaming and inflated bids as well as concerns over true anonymity for small projects and nascent technologies.

Minor technical changes and fixing the appeals timeline

The Government has also proposed some technical changes to CPI to fix a base year of 2024 for the annual strike price adjustment for AR8 and to update the definition of Inside Information to align it with the UK Market Abuse Regulation.

The Government has also ruled out offering a fixed timeline for the auction process instead of the various possible scenarios for fears that fixing the timeline may result in delayed deployment of projects.