Report on DESNZ’s proposed Contracts for Difference for Renewables Allocation Round 7 scheme
Source: gov.uk (2025-10-16)

The Subsidy Advice Unit (SAU) has published its report prepared in response to a request from the Department for Energy Security and Net Zero (DESNZ) concerning the proposed Contracts for Difference for Renewables (CfD) Allocation Round 7 (AR7) scheme.

Administrative timetable

Final report

16 October 2025: The SAU has published its report providing advice to DESNZ concerning the proposed CfD AR7 subsidy scheme. The report sets out the SAU’s evaluation of DESNZ’s Assessment of Compliance of its proposed subsidy scheme with the requirements set out in the Subsidy Control Act 2022.
- Final report (https://www.gov.uk/government/publications/report-on-desnzs-proposed-contracts-for-difference-for-renewables-allocation-round-7-scheme) (16.10.25)
Request from DESNZ

5 September 2025: The SAU has accepted a request for a report from DESNZ concerning the proposed CfD AR7 subsidy scheme. This request relates to a Subsidy Scheme of Particular Interest.

The SAU will prepare a report, which will provide an evaluation of DESNZ’s assessment of whether the Scheme complies with the subsidy control requirements (Assessment of Compliance). The SAU will complete its report within 30 working days.

Information about the subsidy scheme provided by DESNZ

The CfD scheme has existed since 2014, its objective is to encourage low-carbon electricity generation, whilst having regard to carbon targets and budgets (under the Climate Change Act 2008), ensuring security of supply to consumers of electricity, and the likely cost to consumers of electricity. CfDs are long-term (15-year or 20-year) contracts between a low carbon electricity generator and the CfD counterparty, the Low Carbon Contracts Company (LCCC). The generator sells the electricity at a variable market price. When the market price is below the strike price agreed in the CfD, the generator receives a top-up payment from LCCC for the additional amount (funded by a levy on electricity suppliers). When the market price is above the strike price, the generator must pay back the difference to LCCC. The CfD scheme is open to application from any eligible renewable electricity generating station being or to be built in Great Britain.

Eligible technologies are: advanced conversion technologies, anaerobic digestion (>5MW), dedicated biomass with combined heat and power (CHP), energy from waste with CHP, floating offshore wind, geothermal, hydro (>5MW and <50MW), landfill gas, offshore wind, onshore wind (>5MW), remote island wind (>5MW), sewage gas, solar photovoltaic (>5MW), tidal stream, and wave. Typically, CfDs are offered following a competitive allocation round, and the lowest bids are accepted until the maximum budget for the allocation round is reached.

Allocation Round 7 (AR7) opened to applications on 7 August 2025. Offshore wind and floating offshore wind are in an allocation round designated ‘Allocation Round 7’. All other technologies are in a separate allocation round, designated ‘Allocation Round 7a’. Whilst both rounds opened to applications at the same time, this procedural change will allow the offshore wind and floating offshore wind contract allocation process to proceed in the event that all such applications are deemed eligible by the Delivery Body (NESO), without having to wait for the conclusion of any appeals in relation to other technologies (thus potentially allowing earlier publication of results).

The main changes made to the CfD scheme in AR7 include:

relaxing eligibility requirements to allow fixed-bottom offshore wind projects to apply for a CfD while awaiting full planning consent

using new regulatory powers to change the information the Secretary of State uses to inform the final budget - for fixed-bottom offshore wind, the budget will be published before the sealed bid window; only bid information on projects that breach the budget level will be viewed by the Secretary of State; and a budget increase will only be considered if there is a benefit to consumers

increasing the length of new CfD contracts from 15 to 20 years for fixed-bottom offshore wind, floating offshore wind, onshore wind and solar technologies

In addition, the government has:

implemented the proposed contract and rule changes to allow repowered onshore wind projects to access CfD support

implemented the proposed contract changes to extend phasing to floating offshore wind

increased the length of the Target Commissioning Window for solar PV from 3 to 12 months

implemented a temporary restriction on CfD capacity surrendered from previous allocation rounds being entered into AR7

DESNZ has published a Pot and Price Notice for AR7. This includes a slighted changed pot structure for AR7, with floating offshore wind moving to a new Pot 4, reflecting changes to the running of the allocation processes for different technologies. DESNZ will publish the budgets for AR7 ahead of the respective sealed bid windows.

This budget will represent the yearly budget cap available for AR7 auctions over the relevant 4- or 5-year valuation period (the relevant delivery years plus two further years), though successful projects will receive subsidy over a 15-year or 20-year period, so an estimate will be provided for the total subsidy amount on the transparency database. As an indication, the estimated total subsidy amount for Allocation Round 6 (AR6) is £20 billion (rounded up to the nearest £5 billion, September 2024 prices), and the largest estimated subsidy amount for any of the contracts actually awarded under AR6 is £4,245 million (rounded up to the nearest £5 million). However, the estimated total subsidy amount and estimated maximum subsidy amount for any individual contract for AR7 may be significantly lower or higher than these figures. (These estimates are highly uncertain as actual payments will depend on market wholesale prices at the time and how much electricity each project generates).

Information for third parties

If you wish to comment on matters relevant to the SAU’s evaluation of the Assessment of Compliance concerning the proposed CfD AR7 subsidy scheme, please send your comments on the date stipulated in the timetable above. For guidance on representations relevant to the Assessment of Compliance, see the section on reporting period and transparency in the Operation of the subsidy control functions of the Subsidy Advice Unit (https://www.gov.uk/government/publications/guidance-on-the-operation-of-the-subsidy-control-functions-of-the-subsidy-advice-unit/operation-of-the-subsidy-control-functions-of-the-subsidy-advice-unit).

Please send your submissions to the public authority: xxx@xxx.xx (mailto:xxx@xxx.xx).

Please also provide a contact address and explain in what capacity you are making the submission (for example, as an individual or a representative of a business or organisation).

Notes to third parties wishing to make a submission

The SAU will only take your submission into account if it can be shared with DESNZ. The SAU will send a copy of your submission to DESNZ together with its report. This is to allow the public authority to take account of the submission in its decision as to whether to modify the scheme or its assessment. We therefore ask that you provide express consent for your full and unredacted submission to be shared. We also encourage you to share your submission directly with DESNZ using the email address provided above.

The SAU may use the information you provide in its published report. Therefore, you should indicate in your submission whether any specified parts of it are commercially confidential. If the SAU wishes to refer in its published report to material identified as confidential, it will contact you in advance.

For further details on confidentiality of third party submissions, see identifying confidential information in the Operation of the subsidy control functions of the Subsidy Advice Unit (https://www.gov.uk/government/publications/guidance-on-the-operation-of-the-subsidy-control-functions-of-the-subsidy-advice-unit/operation-of-the-subsidy-control-functions-of-the-subsidy-advice-unit).

Contacts
- CMA press team: xx-xxxx-xxxx or xxx@xxx.xx (mailto:xxx@xxx.xx)