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08 Jan 2021

Offshore wind wins big in advance of the fourth CfD allocation round

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The offshore wind industry has received a tangible boost from the UK Government following a change in the way that its investment backing is allocated. 
 
In November 2020, following a consultation, the UK's Department for Business, Energy and Industrial Strategy (BEIS), announced changes to the way in which contracts for difference (CfDs) are awarded. CfDs are the UK government's primary method for investing in the generation of low carbon electricity. Previously, CfDs were allocated between two "pots" or groups of bidders, namely (i) established technologies and (ii) less established technologies.

The BEIS announcement confirmed the creation of a new dedicated 'pot' for bids specifically for fixed-bottom offshore wind projects. As a result, (1) fixed-bottom offshore wind projects will no longer compete with other technologies for a share of investment in its pot; and (2) floating wind projects will compete only with other ‘less established technologies’ and do not need to compete with fixed-bottom wind projects. The announcement increases the likelihood of offshore wind projects being awarded CfDs in the UK's fourth round of allocation (AR4).

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