UK govt outlines planned changes for CfD payments

The UK government has received support for its proposal to put off planned increases in electricity suppliers' payment obligations under the Contract for Difference (CfD) scheme and adopted further deferrals of due payments.

The changes to the electricity suppliers' obligations were proposed following a drop in electricity demand caused by the COVID-19 lockdown measures and increased payments to CfD generators due to lower wholesale electricity prices. The higher obligations were initially expected to be collected by the Low Carbon Contracts Company (LCCC) in July for the second quarter of 2020 but the plan suggests that the payment of part of the amount of the increase is postponed to the first quarter of 2021.

A public consultation resulted in 22 responses that were generally “supportive,” the government said on Thursday. After getting the input, the Department of Business, Energy and Industrial Strategy (BEIS) has decided to amend regulations in the CfD regime to allow a further postponement of suppliers’ obligations, adding an extra quarter to its original proposal. As a result, the total level of the obligation will be increased in the second quarter of 2021, rather than in the first one.

The government will also protect suppliers from 80% of the increase in suppliers’ obligations in the current quarter by extending up to GBP 100 million (USD 126.4m/EUR 111.4m) in debt to LCCC. This is higher than its initial proposal of 67% prior to the consultation. Amendments will also be made to calculate the reduction in suppliers’ obligations for the current quarter and the increase for the future quarter.

The proposals have been sent to parliament for approval, which is anticipated to be granted before July 9, when LCCC plans to carry out the reconciliation process for the current quarter. If there is no approval, BEIS will still provide the loan facility to LCCC and obligations for the current quarter will remain unchanged.

(GBP 1.0 = USD 1.264/EUR 1.114)

Choose your newsletter by Renewables Now. Join for free!