CfD Allocation Round 7 – changes are afoot!

On 24 July 2025, DESNZ published its much-anticipated key documents for CfD Allocation Round 7 for which the application window is due to run from 7 August 2025 to 27 August 2025.   The documents include (i) the Contract Allocation Framework; (ii) CfD AR7 Standard Terms and Conditions; and (iii) Statutory Notices (collectively “AR7 Key Documents”).   These documents follow DESNZ’s publication of its AR7 consultation outcome, which focused on reforms to AR7 and the broader CfD scheme in support of the renewable deployment targets set out in the Government’s 2030 Action Plan (2030 Action Plan). 

AR7 will be split into two separate allocation rounds - one for offshore wind technologies (AR7) and a second for non-offshore wind technologies (AR7a), with separate indicative timelines being published for each (AR7 Timeline | Contracts for difference CfD).  This split recognises that non-offshore wind projects will likely follow a longer timeline due to a larger volume of applications.

Significant changes within the AR7 Key Documents include:

1. Relaxation of the eligibility requirements for fixed-bottom offshore wind projects (“FB offshore”)  

FB offshore projects can now apply for a CfD without full planning consent – it is hoped this will increase competition and reduce strike prices by enabling earlier-stage projects to participate. From a planning permission perspective, developers must confirm that no relevant planning consent has been refused and submit a director’s declaration.   To address non-delivery risks, projects must have also (i) submitted (and had accepted for examination) a DCO application (England & Wales); or (ii) commenced a public consultation on the submitted s36 consent and marine licence applications (Scotland), at least 12 months before CfD application.  An appropriate threshold for smaller non-DCO projects will be consulted on in due course. Changes to the Non-Delivery Disincentive provisions are not anticipated as a result of this decision as this will require regulatory amendments which cannot be implemented ahead of AR7 commencement.  An additional, later delivery year (2030/31) for FB offshore projects has also been confirmed and the clearing prices of Scottish FB offshore projects will be separate to other FB offshore projects. 

2. Longer CfD terms 

The length of new CfD contracts will increase from 15 years to 20 years for FB offshore, floating offshore wind, onshore wind, and solar technologies.  This recognises a need for significant scaling up of this capital-intensive infrastructure from now into the 2030s (and beyond) to enable the anticipated surge in electricity demand to be met by renewable generation capacity.  It is hoped that a longer contract term will enhance investor confidence (by reducing exposure to market volatility and merchant tail revenue risk), spread capital costs more evenly over time and reduce strike prices.  Indexation will remain as CPI for the duration of the contract term, although it is slightly unclear based on the AR7 Standard Terms and Conditions and the AR7 Generic Agreement (CfD Allocation Round 7: Generic Agreement) what the base month for CPI indexation will be (references to 2012 as the base year still appear in the Generic Agreement).

3. Extended Target Commissioning Window (TCW) for solar PV projects (above 5MW) 

The TCW for solar PV projects (>5MW) will be extended from 3 months to 12 months in recognition of the increase in size of solar PV projects both in development and required to meet 2030 clean power ambitions.    

4. Temporary restriction on capacity surrendered from previous rounds 

To prevent cost inflation and ensure fair competition, capacity surrendered in previous CfD allocation rounds (1-6) (whether via Permitted Reduction or Final Installed Capacity (FIC) flexibilities) will be temporarily restricted from bidding into AR7 with a view to implementing an enduring policy from AR8.  This restriction will not prevent a developer using these flexibilities to reduce project capacity pursuant to the terms of their CfD contract – it simply prevents surrendered capacity being re-bid.  Developers must provide evidence that they are not attempting to re-enter surrendered capacity as part of the AR7 application process.  The intricate process and rules around developers bidding in additional generating capacity that was never subject to a CfD (but forms part of a project that secured a CfD) remain unaffected.

5. Introduction of repowering rules for onshore wind projects

DESNZ previously elected (October 2024) to enable CfD support for full onshore wind repowering projects from AR7 onwards and further detail is provided within the AR7 Key Documents as to its implementation.   To be eligible, a developer must evidence that its original project commenced commercial operation at least 25 years before the Target Commissioning Date (TCD) of the repowered project (subject to limited flexibility to recognise that new projects might commission ahead of schedule). A further operational condition precedent has been included within the CfD AR7 Standard Terms and Conditions requiring demonstration that decommissioning has occurred to qualify for CfD payments.  Repowering requires the removal of all major generating components associated with the original project excluding unused turbine foundations and grid infrastructure (including transformers and switchgear).  In contrast “life extension” projects will involve continued operation without substantial asset replacement and, as such, will be ineligible for CfD support.  DESNZ will announce the AR7 pot structure and auction parameters for repowered projects ahead of applications opening.

6. Phased CfDs for floating offshore wind 

DESNZ previously confirmed (October 2024) that phasing would be permitted for floating offshore wind projects – having previously been available for fixed-bottom projects only.  The AR7 Key Documents clarify that the total project capacity cannot exceed 1,500MW across a maximum of three phases and that at least 25% of the total capacity is commissioned in the first phase. Floating offshore wind will benefit from a separate pot and a single strike price will apply across all phases.  The first phase must be commissioned by 31 March of the final Delivery Year and the final phase no later than two years thereafter.  DESNZ has confirmed that it will keep phasing under review, including whether to extend it to other technologies in the future.

7. Support of multiple test and demonstration scale projects for floating offshore wind

DESNZ recognises the need to support innovative test and demonstration scale projects for floating offshore wind and providing an appropriate route to market.   Accordingly, it has committed to set appropriate budget and auction parameters to facilitate deployment in AR7 (and beyond).   Watch this space!

8. Administrative Strike Prices (ASPs)

ASPs for AR7 are shown in 2024 prices (and 2012 prices for information only).   All AR7 bids should be submitted in 2024 prices – a change from previous rounds (2012 prices).   All technologies benefit from either a static or increased AR7 ASP (as compared to AR6 (2024 prices)) save for AD (>5MW), dedicated biomass with CHP, landfill gas and solar PV (>5MW).

9. Changes to the information the SoS uses to inform the final budget

For fixed bottom offshore wind: 

(i) a Contract Budget Notice (CBN) will be published before the sealed bid window (earliest indicative date is 6 October 2025) informing applicants of the available AR7 budget; 

(ii) the SoS may receive anonymised bid information from NESO after the submission of sealed bids but before the auction is held to inform the Treasury of any potential budget increase - only bid information on projects that breach the budget level will be viewed by SoS; 

(iii) a budget increase will only be considered if there is a benefit to consumers; and 

(iv) flexible bids for offshore wind (AR7) will not be permitted.  

For all other technologies: 

(i) a CBN will be published before the sealed bid window (earliest indicative date is 6 October 2025); 

(ii) SoS will not have access to bid information for any other technologies; and 

(iii) a maximum of four flexible bids can be submitted for AR7 (being multiple bids for the same project with different strike prices and/or capacities). 

10. Changes to reflect the establishment of NESO and Clean Industry Bonus (CIB) payment suspensions 

Minor changes have been made to the CfD AR7 Standard Terms and Conditions to reflect the establishment of NESO and the responsibilities assigned to it. 

DESNZ has previously confirmed circumstances in which CIB payments will be excluded from certain provisions allowing the suspension of CfD payments as there was not a clear and direct connection between the reason for suspension and the CIB itself.  This principle has been extended such that CIB payments will not be suspended in cases where generators fail to comply with specific undertakings related to their status as Private Network Generators – being a requirement to remain a Private Network Generator and the obligation not to supply electricity to an offshore installation.

Commentary

As anticipated, the above changes demonstrate a strong alignment with the Government’s Clean Power 2030 objectives with a focus on strengthening investor confidence and a need to scale up deployment of offshore wind, onshore wind and solar PV. CfDs are intended to remain the main route for low carbon support going forward, and it is crucial to ensure that the scheme offers value for money for consumers whilst also encouraging investor engagement. However, we note that no express mention is given to changes to negative pricing principles which is an area many stakeholders remain concerned about.   One to watch perhaps.   

The interaction between connections reform and AR7 participation eligibility is also causing a number of developers a headache. One particular example is the relative flexibility under the AR7 framework as to the start and end date of the Target Commissioning Window (TCW).  This contrasts with the potential inflexibility of what date a bidder can select as its Target Commissioning Date (TCD) - being no later than the last date of the last permitted Delivery Year.   Current connection dates under existing grid connection documentation may fall just after the last permitted TCD (but remain within the TCW) - this may be problematic given the Schedule 5 application checks to be undertaken by NESO (as the Delivery Body).  However, some developers are hopeful that their current connection date will be brought forward as a result of connections reform and therefore wait to see if this disconnect will be addressed.   

If you have any questions or need further clarification, please get in touch with Emma Andrews, James Phillips, Alec Whiter, Ross Fairley, or Nick Churchward of the Burges Salmon energy team.

We know that clean power by 2030 is the route to building a more secure energy system that can bring down bills for good. Our priority is to deliver at least cost to billpayers and taxpayers and the most economic benefit to the country. As we do so, we know the next few CfD allocation rounds will be particularly important in ensuring we build the clean energy infrastructure we need at the best possible price for consumers. The reforms we are setting out today represent an important step forward for our mission. By securing investment in renewable energy at competitive prices, we will increase our energy independence, protect billpayers, create good jobs and drive growth around the country. Ed Miliband, Secretary of State for Energy Security and Net Zero