Contracts for Difference Allocation Round 3

2019Round 3Pure pricecfd two way6 winners5.5 GW6 won

Also known as: AR3, UK AR3, CfD Allocation Round 3, Contracts for Difference Allocation Round 3, Allocation Round 3, Third CfD Allocation Round, Third Allocation Round, UK CfD AR3, 2019 CfD Allocation Round, 2019 Contracts for Difference Allocation Round

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Framework Snapshot

§2 and §17 of the UK AR3 writeup.

Competition

Bidders (preQ → bid → won)

Format

Sealed · single-round

Prize / Award

Award

Contract for Difference

Capacity

5.5 GW

Target delivery

1 year for AR3 Pot 2 technologies; the Target Commissioning Window may be extended day-for-day for Force Majeure and specified grid-delay events under the contract definitions.

Project stage at bidding

post permit

Commercial terms

Price

GBP 39.6–41.6/MWh (2012 real)

Payment duration

15 years

Indexation

CPI

Risk allocation

Site investigation

developer

Offshore transmission

developer

Negative prices

Difference Amount is zero during rolling negative-price periods: for intermittent technologies, any block of 6 or more consecutive hourly settlement units with negative IMRP; for baseload technologies, 12 consecutive half-hour settlement units where the corresponding 6 hourly IMRP units are negative.

Wake-loss support

—

Curtailment policy

Part 11 provides curtailment compensation for Qualifying Curtailment / Qualifying Partial Curtailment, including a four-condition test requiring Change in Law, balancing-mechanism failure limb, causation, and compensation shortfall.

Non-delivery penalties

AR3's non-delivery disincentive is contract-termination-without-payment rather than a financial penalty: failure to satisfy the Milestone Requirement or Operational Conditions Precedent can lead to pre-Start-Date termination, and failure to deliver required installed capacity can trigger deemed capacity reduction and termination.

1Prize Composition

Award Components

Contract for Difference(15y)— Specified Expiry Date is the 15th anniversary of the earlier of the Start Date and the last day of the Target Commissioning Window.

15-year two-way FiT Contract for Difference awarded to successful applicants; LCCC pays the generator when the reference price is below the strike price and the generator pays LCCC when the reference price is above the strike price.

Site Investigation: developer

State pre-investigated site: No

Transmission Build: developer

Delivery Obligations

Initial Milestone Delivery Date / Milestone Requirement — 12 months after the CfD Agreement date.

→ By the milestone date the generator must satisfy the Milestone Requirement either through the 10% spend test or by delivering the required Project Commitments and supporting information. Failure allows the CfD Counterparty to terminate before Start Date, subject to the contract response process.

Operational Conditions Precedent by Longstop Date — Operational Conditions Precedent must be fulfilled or waived before the Longstop Date.

→ If Operational Conditions Precedent are not fulfilled or waived by the Longstop Date, the CfD Counterparty may terminate before Start Date.

Final Installed Capacity Notice — No later than 10 Business Days after the Longstop Date, following Start Date.

→ If the notice is not given on time, Final Installed Capacity is deemed to be 80% of the Installed Capacity Estimate; Final Installed Capacity below Required Installed Capacity is also a termination event.

TCW: 1 year for AR3 Pot 2 technologies; the Target Commissioning Window may be extended day-for-day for Force Majeure and specified grid-delay events under the contract definitions.

Late delivery: AR3's non-delivery disincentive is contract-termination-without-payment rather than a financial penalty: failure to satisfy the Milestone Requirement or Operational Conditions Precedent can lead to pre-Start-Date termination, and failure to deliver required installed capacity can trigger deemed capacity reduction and termination.

Extension grounds: Force Majeure with day-for-day extension under the contract definitions.; Delay in required transmission, distribution, or OFTO reinforcement / connection works not caused by the generator, subject to notice and mitigation requirements.

2Competition Mechanism

Strike Price bid(GBP/MWh (2012 prices))↓ Lower winsWeight: 100%

Phases: final binding (binding)

Bid Format

Single-round sealed-bid pay-as-clear allocation by Delivery Year. Applicants submit one sealed bid at original application parameters plus up to three additional Flexible Bids, subject to Rule 11 constraints; if no sealed bid is submitted, the Delivery Body assigns a default bid at the applicable Administrative Strike Price.

sealedsingle-round1 rounds

Reserve: — Administrative Strike Price acts as the hard bid cap / reserve price. For Offshore Wind in AR3, the ASPs were £56/MWh for Delivery Year 2023/24 and £53/MWh for Delivery Year 2024/25.

Selection Envelopes

Overall Monetary Budgetmaximum · monetary budget65,000,000 GBP (2011/12 prices)

Overall Capacity Capmaximum · capacity6 GW

3Qualifying Gates

Eligible Generator status / not already commissionedbinary predicate

Application must satisfy Eligible Generator requirements under the CfD regulations; no application may be made for a generating station that has already been commissioned.

Applicant incorporation / legal status evidencebinary predicate

Applicant must provide evidence of incorporation, registration, or equivalent legal personality sufficient to enter into the CfD contract.

Applicable planning consentsbinary predicate

Applicant must demonstrate that applicable planning consents either do not apply or have been obtained and are sufficient for the proposed CFD Unit's location, capacity, technology, and electricity export arrangements.

Connection Agreement(s)quantitative minimum≥75 percent of Initial Installed Capacity Estimate

Applicant must provide qualifying connection evidence; for direct connection cases the secured capacity must be at least 75% of the Initial Installed Capacity Estimate, with separate agreement evidence per phase where applicable for Phased Offshore Wind.

Supply Chain Plan Approval Certificatebinary predicate≥300 MW generating capacity

Any generating station with generation capacity of 300 MW or more must hold a valid Supply Chain Plan Approval Certificate before the main AR3 application window.

Non-receipt of other government supportbinary predicate

Applicant must confirm that the project is not an excluded application by reason of overlapping support such as NFFO, Scottish Renewables Obligation, Renewables Obligation, an existing CfD / Investment Contract, or Capacity Market support, subject to permitted dual-scheme exceptions.

Target Commissioning Date within Delivery Yearbinary predicate

The Target Commissioning Date must fall within the relevant Delivery Year for which the application is made.

Phased Offshore Wind CFD Unit requirementsformula based

Phased Offshore Wind CFD Units must satisfy the structural rules for phased projects: maximum total capacity 1,500 MW, first phase at least 25% of total capacity, first-phase TCD no later than 2025-03-31, final-phase TCD no later than two years after the first phase, and maximum three phases.

Advanced Conversion Technology physical separation requirementbinary predicate

Advanced Conversion Technology projects must demonstrate compliance with the Physical Separation Requirement between the synthesis chamber and combustion chamber.

Biomass / EfW with CHP efficiency standardsformula based

Dedicated biomass with CHP and energy-from-waste with CHP projects must satisfy the June 2018 efficiency standards: at least 70% overall efficiency (net calorific value), 10% primary energy saving (gross calorific value), and 10% heat efficiency (gross calorific value).

Remote Island Wind conditionsquantitative minimum≥50 km of cabling total, including >= 20 km subsea

Remote Island Wind projects must generate electricity from wind, be located on a qualifying Remote Island, be connected to the national Transmission System or a Distribution System, and satisfy the electrical remoteness test of at least 50 km of cabling of which at least 20 km is subsea.

4Scoring Dimensions

Strike Priceprice100%lower wins

Method: quantitative formula

Unit: GBP/MWh (2012 prices)

5Tiebreak Chain

closest envelope fit — Where tied applications would cause the Monetary Budget or Overall Capacity Cap to be exceeded, select the application or combination of applications that comes closest to fulfilling the Monetary Budget in the final year of the Budget Profile without exceeding the applicable envelope.
electronic random assignment — If two or more tied applications or combinations are equally close to the Monetary Budget, choose randomly using an electronic random assignment process.

6Revenue Mechanism

Instrumentcfd two way

Directionbidirectional

Term15 years

Term StartEarlier of the Start Date and the last day of the Target Commissioning Window.

Indexationcpi — Annual CPI indexation in 2012-price terms under Condition 14; Inflation Factor uses CPI_t / CPI_base with CPI_base linked to the October CPI for the calendar year preceding the 2012 base year.

Reference PriceTechnology-specific Market Reference Price under the Standard Terms: Intermittent Market Reference Price for Offshore Wind, Remote Island Wind, Tidal Stream and Wave; Baseload Market Reference Price for ACT, AD, Biomass with CHP and Geothermal.

Price ComputationIMRP is derived from GB day-ahead hourly prices for 1-hour settlement units; BMRP uses the applicable season-ahead baseload index for half-hour settlement units.

Rate Cadenceper settlement unit

Payment Cadencemonthly in arrears

Negative Price RuleDeveloper not paid (after 6h) — Difference Amount is zero during rolling negative-price periods: for intermittent technologies, any block of 6 or more consecutive hourly settlement units with negative IMRP; for baseload technologies, 12 consecutive half-hour settlement units where the corresponding 6 hourly IMRP units are negative.

Curtailment CompensationPart 11 provides curtailment compensation for Qualifying Curtailment / Qualifying Partial Curtailment, including a four-condition test requiring Change in Law, balancing-mechanism failure limb, causation, and compensation shortfall.

7Authorities & Jurisdiction

Department for Business, Energy and Industrial Strategypolicy ownerscheme ownernational

Legal basis: Energy Act 2013 and the Contracts for Difference (Allocation) Regulations 2014 as amended, including SI 2018/1018; BEIS issued the 1 May 2019 AR3 notices and policy documents through the Secretary of State.

National Grid Electricity System Operator Limiteddelivery bodynational

Legal basis: Acts as the EMR Delivery Body under the Contracts for Difference (Allocation) Regulations 2014.

Low Carbon Contracts Companycounterpartynational

Legal basis: CfD counterparty under section 14 of the Energy Act 2013.

Gas and Electricity Markets Authorityappeals authoritynational

Legal basis: Handles Non-Qualification Reviews and Qualification Appeals under the CfD allocation regulations and Allocation Framework section 8.

Independent Auditorindependent auditornational

Legal basis: Appointed under Regulation 36 to audit valuation and allocation calculations for the round.

European Commissionstate aid regulatorsupranational

Legal basis: State aid competent authority for the pre-Brexit EU State Aid regime governing AR3, including scheme approval SA.44475 and Remote Island Wind approval SA.49318.

8Process & Timeline

Process Stages

1. Pre-application preparation and Supply Chain Plan approval — Applicants prepare applications, secure any required Supply Chain Plan Approval Certificate, and assemble planning, connection, and legal-status evidence before the main application window opens.2. Application submission — Applications are submitted during the AR3 application window with technology, capacity, Target Commissioning Date, declarations, and supporting evidence.3. Qualification checks — Delivery Body assesses eligibility, planning, connection, support-overlap, and technology-specific requirements under Rules 3-5 and Schedule 4.4. Non-qualification review — Applicants found non-qualified may request review by the stated review request date.5. Qualification appeal — Applicants may pursue a qualification appeal to GEMA / Ofgem by the appeals deadline date.6. Valuation of qualifying applications — Delivery Body calculates application valuations using the Schedule 2 formula in 2012 prices.7. Budget and capacity-cap assessment — Delivery Body determines whether qualifying applications fit within the overall monetary budget and overall capacity cap and whether an auction is required.8. Notice of Auction and budget-revision window — Where required, the Delivery Body issues the Notice of Auction after the Secretary of State budget-revision window; AR3 did not use a Budget Revision Notice.9. Sealed bid submission window — Qualifying applicants submit sealed bids and any Flexible Bids during the bid window of at least five working days.10. Auction execution, interleaving, and tiebreak — Delivery Body runs the sealed-bid allocation, applies interleaving where relevant, and uses the Rule 18 budget-fit then random tiebreak if needed.11. Independent audit and Secretary of State review — Valuation and allocation calculations are audited before final confirmation of outcomes.12. CfD notifications and results publication — Delivery Body issues CfD Notifications and the AR3 results are published, later corrected and re-issued on 11 October 2019.

Timeline Events

1 Dec 2017consultation launchmonth[Department for Business, Energy and Industrial Strategy]— Launch of the December 2017 consultation on proposed CfD scheme amendments.

1 Jan 2018state aid approvalmonth[European Commission]— EU State aid approval SA.49318 allowing Remote Island Wind to compete within the CfD scheme.

5 Jun 2018government response published[Department for Business, Energy and Industrial Strategy]— Government Response Part A published, formalising Remote Island Wind and tightening CHP efficiency / waste-definition rules.

1 Dec 2018statutory amendmentmonth[UK Government]— Contracts for Difference (Allocation) (Miscellaneous Amendments) Regulations 2018 (SI 2018/1018) enacted, introducing Regulation 27A for Remote Island Wind conditions.

26 Nov 2018guidance published[Department for Business, Energy and Industrial Strategy]— Supply Chain Plan Guidance for AR3 published.

4 Dec 2018administrative strike prices methodology published[Department for Business, Energy and Industrial Strategy]— Administrative Strike Price methodology for AR3 published.

10 Feb 2019supply chain plan application window closed[Department for Business, Energy and Industrial Strategy]— AR3 Supply Chain Plan application window closed.

1 May 2019allocation framework and notices published[Department for Business, Energy and Industrial Strategy]— Final Allocation Framework, Final Budget Notice, Standard Terms and Conditions v3, Generic Agreement, Allocation Round Notice, CFD Framework Notice, Standard Terms Notice, and Counterparty Costs Notice published together.

29 May 2019application window open[National Grid Electricity System Operator Limited]— AR3 application window opened.

2 Jul 2019application window close[National Grid Electricity System Operator Limited]— AR3 application window closed; date approximate but consistent with the Allocation Framework timing and review cycle.

16 Jul 2019non qualification review request date[National Grid Electricity System Operator Limited]— Deadline for non-qualification review requests under Rule 8.1(a).

30 Jul 2019non qualification review notice deadline[National Grid Electricity System Operator Limited]— Deadline for the Delivery Body to issue Non-Qualification Review Notices.

7 Aug 2019appeals deadline date[Gas and Electricity Markets Authority]— Qualification appeals deadline date.

20 Sept 2019results published[Department for Business, Energy and Industrial Strategy]— Initial AR3 results publication.

11 Oct 2019results republication corrected[Department for Business, Energy and Industrial Strategy]— Corrected AR3 results re-issued.

9Market Context

Policy Targets in Force at Open

UK Clean Growth Strategy — £557m CfD budget envelope to 2025557 GBP millionby 2025

UK Climate Change Act 2008 — 80% by 2050 target80 percentby 2050

Regime Events

Dec 2017December 2017 CfD scheme amendments consultation launchconsultation launch

Jan 2018EU State aid approval for CfD Remote Island Wind (SA.49318)state aid approval

Jun 20185 June 2018 Government Response Part Aregulatory decision

Dec 2018SI 2018/1018 enactedstatutory amendment

Dec 20184 December 2018 ASP Methodology publicationmethodology publication

Oct 2017UK Industrial Strategy — Clean Growth Strategypolicy strategy publication

Jun 2019UK Net Zero 2050 amendment to Climate Change Act 2008statutory target amendment

Narrative Reference§2 and §17 of the UK AR3 writeup.

Cross-Axis Structures

Financial Parameter Links

Administrative Strike Price (Offshore Wind, per Delivery Year)

Offshore Wind ASP = £56/MWh for Delivery Year 2023/24 and £53/MWh for Delivery Year 2024/25, both in 2012 prices.

Axis 2 bid capHard cap on submitted and awardable strike prices under the Allocation Framework; successful clearing prices cannot exceed the applicable Delivery-Year ASP.

Relationships & Sources

Followed By4 auctions

Source Documents10 documents

Auction Results (6)

Winner	Site/Lot	Category	Capacity	Price	Total Value	Delivery	Term	Mechanism	Signed	Status
Doggerbank Offshore Wind Farm Project 1 Projco Limited	Doggerbank Creyke Beck A P1	Offshore Wind	1,200 MW	GBP 39.65/MWh	—	2023	—	auction clearing	—	—
Doggerbank Offshore Wind Farm Project 2 Projco Limited	Doggerbank Creyke Beck B P1	Offshore Wind	1,200 MW	GBP 41.611/MWh	—	2024	—	auction clearing	—	—
Doggerbank Offshore Wind Farm Project 3 Projco Limited	Doggerbank Teeside A P1	Offshore Wind	1,200 MW	GBP 41.611/MWh	—	2024	—	auction clearing	—	—
Forthwind Limited	Forthwind	Offshore Wind	12 MW	GBP 39.65/MWh	—	2023	—	auction clearing	—	—
Seagreen Wind Energy Limited	Seagreen Phase 1	Offshore Wind	454 MW	GBP 41.611/MWh	—	2024	—	auction clearing	—	—
Sofia Offshore Wind Farm Limited	Sofia Offshore Wind Farm Phase 1	Offshore Wind	1,400 MW	GBP 39.65/MWh	—	2023	—	auction clearing	—	—