Full Transcript for Webinar: A Contracts for Difference overview - AR7 results, future trends and insights

they can finance and build out their own projects. 00:02:39.120 --> 00:02:46.319 The the mechanisms and the mechanics around it, well, if the market price drops below the agreed strike price, the government tops it up. 00:02:46.560 --> 00:02:53.439 And if the market price rises above it, the generator pays back the difference, making it a low-risk, stable contract for all parties. 00:02:54.080 --> 00:02:55.840 So, AR7, what does it mean? 00:02:56.080 --> 00:03:04.639 Well, in simple terms, it's been pivotal as the UK pushes deliver on its pledge to decarbonize the energy sector by 2030. 00:03:05.759 --> 00:03:15.360 The UK must double its renewable capacity this decade, placing significant pressure on both AR7 and AR8 to secure the volumes needed to stay on track. 00:03:17.360 --> 00:03:20.639 Now then let's let's look under the bonnet, so to speak, at AR7. 00:03:21.919 --> 00:03:34.319 This round the government introduced a split between offshore and non-offshore technology parts, enabling a more targeted support and a more balanced competitive landscape amongst qualifying projects. 00:03:36.159 --> 00:03:54.159 In the tables below, overall AR7 spans four parts covering established, emerging, offshore, and floating offshore wind technologies, reflecting in the main, so I appreciate there are some other technologies, the breadth of projects required to meet 2030 goals. 00:03:54.960 --> 00:04:09.039 It's fair to say the outcomes of AR7 have strengthened the UK's future project pipeline, further boosting investor confidence, which is important, and enabling projects to progress, setting a strong momentum heading into AR8. 00:04:09.919 --> 00:04:17.120 That's probably worth mentioning as well to build on that from Will, some of the key reforms that we saw for allocation round seven. 00:04:17.279 --> 00:04:19.920 Um, there's a number of those on the slide there. 00:04:20.079 --> 00:04:24.160 There's a much longer list as well, but we've picked out sort of the key points of note. 00:04:24.240 --> 00:04:29.680 Um, the first of which being that new pot split between offshore and non-offshore technologies. 00:04:29.920 --> 00:04:33.920 Now, the pot structures can change across different allocation rounds. 00:04:34.000 --> 00:04:40.319 It's not always a set uh set structure across those, but we saw offshore and non-offshore being split. 00:04:40.399 --> 00:04:54.560 Uh, floating offshore wind historically has operated within that pot too for emerging technologies, but we saw that government clearly wanted to give dedicated support to the development of the technology and as such ended up with its own pot for this allocation round. 00:04:54.800 --> 00:05:03.199 Uh, interestingly, as well, another reform for this allocation round was around extending the CFD contract lengths from 15 years to 20 years. 00:05:03.360 --> 00:05:35.439 This applied to fixed foundation offshore wind, so pot three, uh, floating offshore in pot four, and onshore wind and solar in pot one, uh, with the idea being that uh in principle and in theory, that change could uh reduce the levelised cost of energy for some of those technologies, given that uh developers would have more time to recover their capital costs over the duration of a 20-year contract rather than 15, um, that could then in turn have uh sort of impacts on consumer savings and support that element of the CFD as well. 00:05:35.600 --> 00:05:37.680 Um, so that was something we saw come through. 00:05:37.839 --> 00:05:41.279 Um, equally relaxed eligibility criteria for offshore wind. 00:05:41.360 --> 00:05:43.040 This was a really interesting one again. 00:05:43.199 --> 00:05:51.360 Um, this was looking at allowing projects that uh hadn't yet received planning consent to be able to enter uh enter the CFD. 00:05:51.439 --> 00:05:58.639 And so that meant for uh those in England and Wales uh to be eligible by the CFD application deadline. 00:05:58.720 --> 00:06:17.519 Uh 12 months should have passed for projects in England and Wales to have had a development consent order application uh accepted for examination by the Secretary of State, and for Scottish projects uh that they should have applied to the Scottish ministers for section 36 consent and marine licenses, and then the public consultation commenced for those. 00:06:17.600 --> 00:06:25.759 So, in essence, what that has done is broadened the potential pipeline for projects, and we've seen sort of how this kind of comes through in results that we'll talk about in a moment. 00:06:25.920 --> 00:06:30.160 Um, and also noting on there as well, uh repowered onshore wind now being eligible. 00:06:30.240 --> 00:06:50.480 It's a short point on that bullet point, but a very interesting one to allow again a wider pipeline of projects to enter the scheme, noting that we're expecting uh initial RO generators, so renewables obligation sites, to begin to come to the end of their RO subsidy in the coming years, um to then give that sort of that future route to market option through the CFD there. 00:06:50.720 --> 00:06:56.720 Um final point to note here before we move on is just around those contract budget notices being published before the sealed bid window. 00:06:56.800 --> 00:06:59.439 Again, another change for allocation round seven. 00:06:59.680 --> 00:07:10.079 And this change was brought in with the idea of giving developers an indication of government's ambition for the allocation round, um, with that sort of greater forward view of that. 00:07:10.240 --> 00:07:21.439 Now, government was also looking at publishing a capacity ambition in place of or alongside monetary budgets, but we saw for allocation round seven and that they instead agreed to use a monetary budget as usual. 00:07:21.600 --> 00:07:29.600 Nevertheless, this was another move to give uh more certainty or more clarity for developers that were looking to enter the allocation round. 00:07:32.240 --> 00:07:33.360 Thank you, Lucy. 00:07:33.519 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00:07:35.120 Very uh very helpful there. 00:07:35.279 --> 00:07:41.360 Um before we move on, it'd be good to hear about how the reforms affected Cornwall's forecasting. 00:07:42.000 --> 00:07:43.519 Uh it's a good question, yeah. 00:07:43.680 --> 00:07:51.040 So um for context, we provide forecasts of um potential strike prices and auction outcomes for the CFD. 00:07:51.120 --> 00:08:04.240 Um I think the short answer is that these reforms did affect our forecasting, in as much as you know, some of these are key parameters that would have needed to have been assessed within our forecasting. 00:08:04.319 --> 00:08:17.759 I think main points particularly around um that relaxed eligibility criteria, so it would have meant that our assessment of the offshore wind pipeline um was much broader than it than it would be historically because we had those pre-planning projects within there as well. 00:08:17.920 --> 00:08:25.600 Similarly, with repowered onshore wind, that also meant that there was a wider pipeline, so that um fed through into our forecasting as well. 00:08:25.759 --> 00:08:38.399 Um nevertheless, it keeps it very interesting for us to keep on top of these reforms and forecasting these points and remaining agile to those points as well, is a really important factor with the CFD and any forecasting really that we undertake as a result. 00:08:39.440 --> 00:08:40.559 Thank you, Lucy. 00:08:42.240 --> 00:08:45.120 So let's move on to take a look at the results. 00:08:45.279 --> 00:08:52.480 So on the 14th of January, the UK government announced the results for the AR7 allocation round. 00:08:52.799 --> 00:08:57.039 This is the the offshore wind uh technologies pot only. 00:08:57.279 --> 00:09:03.919 So a delivery of a record-breaking 8.4 gigawatts uh of new onshore wind capacity was announced. 00:09:04.080 --> 00:09:12.559 This makes it the largest offshore wind auction in both British and European history, securing clean electricity to power over 12 million homes. 00:09:13.279 --> 00:09:16.080 In total, 12 projects were awarded contracts. 00:09:16.240 --> 00:09:24.639 This was made up of 10 fixed bottom offshore winds, including one Scottish project and two floating offshore wind projects. 00:09:24.879 --> 00:09:31.120 Competition was extremely strong with an eligible pipeline of 23 gigawatts bidding into the round. 00:09:31.440 --> 00:09:39.600 Initially, there was a pot allocation of 900 million, which would have only supported four to six gigawatts of capacity. 00:09:40.080 --> 00:09:52.080 However, government, under their new changes to the AL7 scheme, allocated a significant increase to the budget of 1.8 billion, which enabled more projects to come through. 00:09:52.559 --> 00:09:56.000 The round saw several industry shaping outcomes. 00:09:56.159 --> 00:10:02.879 RWE emerged as the biggest winner, uh securing almost seven gigawatts across multiple projects. 00:10:03.120 --> 00:10:13.200 And it's expected that the auction is expected to unlock£22 billion in private investment and support around 7,000 new jobs across the UK. 00:10:13.679 --> 00:10:17.919 I'm so going to pass to Lucy now, who will just take us through the strike prices. 00:10:18.960 --> 00:10:19.600 Thanks, James. 00:10:19.759 --> 00:10:23.120 Yeah, so an interesting one to look at on a strike price basis. 00:10:23.200 --> 00:10:34.080 Um for POT three, those uh England and Wales projects, we saw a strike price in 2024 money at£91.20 per megawatt hour. 00:10:34.159 --> 00:10:39.039 Um, and then for Scottish offshore wind,£89.49 per megawatt hour. 00:10:39.120 --> 00:10:46.720 And that was due to a maxima that was set in order to separate out those different clearing prices, hence the slight difference there. 00:10:47.039 --> 00:10:49.679 Um, this saw a slight increase year on year. 00:10:49.759 --> 00:10:55.200 So in 2012 money, because this is the first year that we've had prices reported in 2024. 00:10:55.360 --> 00:11:00.879 Uh, in 2012 money, that pot three strike price equates to£65.45. 00:11:01.440 --> 00:11:04.960 And in the previous year, it the auction cleared at£58.87. 00:11:05.120 --> 00:11:08.480 So as I say, an increase, um, an increase year on year. 00:11:08.639 --> 00:11:16.559 Um, I've mentioned about pot three for Scottish projects, um, but similarly uh in 2012 money that equates to£64.23. 00:11:17.120 --> 00:11:20.799 Um, and in the previous year, that was that same£58.87. 00:11:21.039 --> 00:11:24.480 So that's yeah, there's a similar increase year on year. 00:11:24.559 --> 00:11:37.679 Um, and then for pot four, those floating offshore wind projects uh cleared at£216.49 in 2024 prices, um, which is around£155.37 in 2012 money. 00:11:37.759 --> 00:11:40.639 Um, and again, this is up from the previous year. 00:11:40.799 --> 00:11:54.799 Um, and in terms of how this capacity, so as set out on the slide there, in terms of what that means in delivery years, uh, for offshore wind, it's a really important one because we've seen this 8.4 gigawatts of capacity, which is a really strong outcome from the auction. 00:11:54.960 --> 00:11:59.200 But actually, when that uh capacity comes online is is really key. 00:11:59.440 --> 00:12:08.960 So uh the majority of this capacity is expected to come online in the 2030-31 delivery year, which was the latest delivery year available to these projects. 00:12:09.039 --> 00:12:22.159 Um, I believe 3.8 gigawatts of the English and Welsh projects are due to have that as a delivery year, and the Scottish offshore um 1.4 um gig of that is due to come online in that year as well. 00:12:22.320 --> 00:12:38.240 So of that total 8.4 gigawatts, I believe it's uh 60% of that capacity is due online in that last delivery year of 2030-31, um with the remaining 40% commissioning either in uh in 2028-29 or 2930. 00:12:38.480 --> 00:12:39.600 Typically, this is what we see. 00:12:39.679 --> 00:12:45.360 It tends to be the offshore wind because it has that longer build time, it

usually tends to skew towards those later delivery years. 00:12:45.440 --> 00:12:51.759 Um but 2030, of course, is a date that's very firm in our brains with regard to clean power deadlines and targets there. 00:12:51.840 --> 00:13:03.039 Um, so it's important or as important as it has ever been with that capacity that's due to come online, that that ultimately it is successful, um, and we do see that build um within those time frames. 00:13:04.559 --> 00:13:05.679 Thank you, Lucy. 00:13:06.559 --> 00:13:17.759 So if we move on to the uh AR7 uh pot allocation, so this included pot one, which is established technologies, uh, and pot two, which is emerging technologies. 00:13:17.840 --> 00:13:20.399 So we sort of start to take a look at pot one first. 00:13:20.559 --> 00:13:24.720 So all the awarded capacity went to onshore wind and solar. 00:13:24.960 --> 00:13:30.879 Um, this is the UK's lowest cost and most rapidly deployable clean energy sources. 00:13:31.360 --> 00:13:48.240 So onshore wind was awarded 1.3 gigawatts uh capacity across 28 projects, and solar was awarded 4.9 gigawatt across 157 projects, which is representing the largest solar procurement in UK history. 00:13:48.879 --> 00:13:59.279 Um, across the POT 2 emerging technologies, we saw 20.9 megawatts uh of tidal, um, and that was across four projects. 00:13:59.759 --> 00:14:04.480 I'm going to pass back to Lucy again just to provide an overview of the strike prices. 00:14:06.240 --> 00:14:07.039 Thank you, James. 00:14:07.120 --> 00:14:11.840 Yeah, so strike prices for uh for the non-offshore wind technologies. 00:14:11.919 --> 00:14:21.679 Um firstly, perhaps if I start with uh with onshore wind, in 2024 prices it the technology cleared at£74, uh£72.24. 00:14:22.480 --> 00:14:26.960 And so the PV cleared at£65.23 per megawatt hour. 00:14:27.120 --> 00:14:31.840 Um the key difference there is that onshore wind was up ever so slightly from the previous allocation round. 00:14:31.919 --> 00:14:49.759 Uh so the strike price was um about 2% higher year on year, whereas so the PV actually saw uh a fairly significant reduction from the previous year, um, with that£65.23 being around 6.5% lower year on year, um, which is a key point to note there. 00:14:49.919 --> 00:15:02.960 Um tidal stream as well in that POT 2 emerging technologies, um, that cleared at£265 on the nose per megawatt hour, and that was up around 10% or 11%, I believe, year on year, so a slight increase there. 00:15:03.200 --> 00:15:07.200 Um, but nevertheless, um a good outcome across those technologies. 00:15:07.360 --> 00:15:26.639 And again, when looking at that on a delivery year basis, um, of that total 6.23 gigawatts that was secured across pots one and two, um, all barring 12.4 megawatts, um, which I believe is is some of that pot two capacity commissions either in 2027-28 or 28-29. 00:15:26.799 --> 00:15:29.360 Um, so very much well before 2030. 00:15:29.440 --> 00:15:42.720 Um, and typically this is the case with with these technologies, they tend to have delivery years that are slightly earlier, um, given that the delivery um and the construction of these projects um doesn't have quite the same lead time as something like offshore wind. 00:15:42.799 --> 00:15:47.279 So um it's it's very much expected that uh a lot of that delivery is earlier. 00:15:47.360 --> 00:15:55.120 I think for onshore wind, um that capacity is almost 50-50 split across the 27, 28, and 28-29 delivery years. 00:15:55.200 --> 00:16:04.720 Um, and then for SOLA PV, about two gigawatts is due in the 2027-28 delivery year and around three gigawatts in the 28-29 um year. 00:16:04.799 --> 00:16:12.399 So, again, with that Clean Power 2030 context, um sort of safely within that uh within that time frame for these technologies. 00:16:14.000 --> 00:16:22.639 And so going on to a bit more on some of those key trends for allocation round seven, um, we've got a snapshot here of some of those key uh analysis points to note. 00:16:22.799 --> 00:16:27.519 So um we've already mentioned about the fact that AR7 uh was a really strong auction outcome. 00:16:27.600 --> 00:16:30.559 It was the largest CFD auction round uh in the scheme's history. 00:16:30.720 --> 00:16:36.799 We saw uh a record 201 projects at a total of 14.7 gigawatts of capacity. 00:16:36.879 --> 00:16:40.639 Um, so a really strong, uh strong outcome on a capacity basis. 00:16:41.039 --> 00:16:55.519 Um now for pod 1, um interestingly, despite 79% of pot one capacity being solar PV, uh, on a budgetary basis, the split between solar PV and onshore wind technologies was almost 50-50. 00:16:55.600 --> 00:17:14.240 Um, so in terms of using that budget, um, onshore wind utilized, I think, 13 million less than its overall 160 million budgetary minima, um, but very much seeing solar PV dominating the results overall, uh, particularly so for distribution connected projects in England. 00:17:14.319 --> 00:17:18.880 Um, so that's again is a pattern that we tend to see on a geographic basis. 00:17:19.039 --> 00:17:32.079 Uh, I think 84% of projects uh was solar in England from the auction outcome, whereas 87% uh of onshore wind uh was uh was in Scotland. 00:17:32.240 --> 00:17:36.640 So um, you know, that's very much the trend that we expect to see for those technologies. 00:17:36.880 --> 00:17:49.680 But uh despite that, and despite that sort of skewing of Scottish onshore wind projects, um, we did see two onshore wind projects be successful in England, which are the first two that we've seen since the lifting of the de facto ban. 00:17:49.839 --> 00:17:54.079 Um those were the Emeris Wind Farm and Energy Farm Hindburn 2. 00:17:54.240 --> 00:17:59.920 Uh so very much a noteworthy uh inclusion there and a great outcome for English onshore wind development. 00:18:00.240 --> 00:18:03.039 Um so that was a really strong, strong point to note. 00:18:03.519 --> 00:18:10.559 Um, also for AR7, as we've mentioned, that offshore wind uh outcome was

really uh was really strong. 00:18:10.720 --> 00:18:26.319 So government utilising the ability to adjust the budgets and the fact that we saw the budgets almost doubled uh meant that the capacity outcome for AR7 offshore wind was up three gigawatts on the previous allocation round, which is a really um really significant point to note. 00:18:26.720 --> 00:18:31.359 And then interestingly, some other points on here to bring out uh co-location. 00:18:31.519 --> 00:18:41.359 So this is something that isn't explicitly set out in the results, but interestingly, over 40% of POT 1 capacity that was awarded came from co-located projects. 00:18:41.440 --> 00:18:49.039 Um so really seeing sort of co-location becoming competitive and also at the forefront of um sort of of developer strategies. 00:18:49.599 --> 00:18:57.440 Um and then I think James has already covered some of these uh sort of wider points, but it was interesting to note uh the shifts in bidders and winners. 00:18:57.599 --> 00:19:11.759 So RWE taking up the lion's share of successful offshore wind sites, um, with the other offshore wind projects um being developed by SSE Renewables, so um very much uh one developer there dominating the the offshore outcome. 00:19:11.920 --> 00:19:20.559 Um and then in terms of how this capacity secured sort of measures up to CPE 2030 goals, um it's it's a really good progress towards that. 00:19:20.799 --> 00:19:38.000 Naturally, there's still sort of room um to develop further as we as we run up to 2030, but nevertheless, uh this outcome was was a strong one for allocation round seven, and the priority now should just be um maintaining that momentum for future allocation rounds to ensure that we continue continue building on that success. 00:19:38.880 --> 00:19:40.160 Great, thanks, Lucy. 00:19:42.960 --> 00:19:45.440 So, what's next for developers and investors? 00:19:45.680 --> 00:19:56.400 Now the AR7 results are out, successful bidders can focus moving forward with their final investment decisions, making sure their financing and delivery plans are locked in. 00:19:56.640 --> 00:20:03.279 The next big step in this journey is securing a reliable route to market, and a CFD-aligned PPA is a bank way to get there. 00:20:03.519 --> 00:20:12.559 This is where SMAS can really help offering long-term PPAs that fit neatly with CFD commitments and give the generators a strong read-to-market requirement going forward. 00:20:12.720 --> 00:20:30.240 Noting that our CFD PPAs bring index link pricing, long-term certainty, and a flexible structure that supports projects right from pre-construction through to full operation, giving generators the revenue stability and bankability they need, which naturally boosts confidence for investors too. 00:20:30.400 --> 00:20:45.200 It's worth noting here that a number of developers are now seeking to secure PPAs earlier than in previous CFD rounds, reflecting a growing emphasis on establishing commercial agreements at an earlier

stage to help strengthen investor and lender confidence. 00:20:45.599 --> 00:20:49.119 And to wrap up this slide, really, what are the alternative routes? 00:20:49.359 --> 00:20:53.759 Well, there are a number of options for those that didn't secure a CFD. 00:20:54.000 --> 00:21:07.359 Importantly, there's still plenty of projects available and opportunity through smartest framework PPAs or corporate PPAs, both of which are likely to grow as more generators and energy buyers look for long-term green energy contracts. 00:21:08.000 --> 00:21:11.359 So, quick question moving forward to Lucy. 00:21:11.519 --> 00:21:18.640 Looking ahead to the future, what role do you think these projects will play in delivering clean power in the coming years? 00:21:18.720 --> 00:21:22.640 And what are the key changes that are required to ensure their success? 00:21:24.559 --> 00:21:28.000 So, yeah, the short answer to that is uh a significant role. 00:21:28.160 --> 00:21:42.240 Um, we have done some analysis at Cornwall Insight, and we've seen that uh approximately 13 gigawatt of solar PV is still required to meet the lower end of the CP30 target uh capacity ranges, with onshore wind still requiring about eight. 00:21:42.480 --> 00:21:55.519 Um, and for offshore wind, I think uh the current built capacity plus AR7 means that we're anywhere between about 14 and a half and 20 gigawatts short, depending on which scenario you look at from those CP30 targets. 00:21:55.680 --> 00:21:59.759 So, as I mentioned um sort of in the previous slide, this is a really strong first step to. 00:22:00.160 --> 00:22:00.960 Towards that. 00:22:02.079 --> 00:22:14.480 Now we know with some of those changes to offshore wind and those pre-planning projects, what that does mean is there is potentially a slightly heightened non-delivery risk for those offshore wind projects. 00:22:15.200 --> 00:22:25.359 If we were to see one of those sites ultimately not secure a planning application, that that could uh or you know that could risk some of that capacity being delivered. 00:22:25.519 --> 00:22:34.960 But I think we need to be looking at this with the most uh optimistic outcome until such time as we see that that risk kind of materialize and hope that it does not. 00:22:35.119 --> 00:22:47.759 Um but we do also see on a more uh general basis across allocation rounds that there are some projects that either won't reach final investment decision or it may be that um ultimately they don't pursue their CFD. 00:22:47.839 --> 00:22:58.799 So, as you've you've just noted there, some of those alternative routes, uh corporate PPAs can sometimes end up being a better option for a particular asset or developer based on their uh their strategy and their approach. 00:22:58.960 --> 00:23:08.880 So um it may well be the case that not all of the capacity that was secured in AR7 ultimately uh ultimately ends up pursuing its CFD and coming online as that route to market. 00:23:09.039 --> 00:23:23.440 Um but I think it's just a case of ensuring that across the market it's still uh an environment that has uh, you know, is there is significant appetite and investor confidence to be able to bring new renewable energy projects forward. 00:23:23.680 --> 00:23:34.400 Now, AR8 and some of the reforms of that will be a major factor in the success of following allocation rounds, and we know that there's um some bits on the table there that they're looking at changing. 00:23:34.480 --> 00:23:41.119 So actually, if we move on to the next slide, please, I can talk a bit more about some of those proposed changes for allocation round eight. 00:23:41.440 --> 00:23:45.440 Now, um the first point we're noting on here is around the clean industry bonus. 00:23:45.599 --> 00:24:03.279 Now, this was a separate consultation that we've recently seen a response to, um, and we know that government is going to be uh introducing an interim fair work charter as looking at introducing that in the clean industry bonus as a sort of a category that needs to be met in future allocation rounds. 00:24:03.440 --> 00:24:13.200 So, what this means is that developers applying for clean industry bonus funding must sign up to an interim offshore wind fair work charter where that's relevant on a technology basis. 00:24:13.440 --> 00:24:17.119 And suppliers included in the clean industry bonus must also comply. 00:24:17.200 --> 00:24:20.799 Um, but there are exemptions for small businesses and new facilities. 00:24:20.880 --> 00:24:24.160 Um we've not got it noted there around the clean industry bonus. 00:24:24.319 --> 00:24:33.039 There were questions around introducing onshore wind to this process, and government has opted to introduce onshore wind from allocation round nine rather than eight. 00:24:33.119 --> 00:24:37.519 So we know that that's a change for the sort of this time next year when we're having this webinar in a year's time. 00:24:37.599 --> 00:24:39.039 Perhaps that's one to talk about. 00:24:39.119 --> 00:24:41.680 Um, but one that we know is coming down the tracks. 00:24:41.920 --> 00:24:49.279 And then the remaining points we've noted on this slide here are in relation to a separate consultation that we are now awaiting the response to. 00:24:49.440 --> 00:24:57.519 Um, but this was looking at uh a number of different factors for allocation round eight, one of which being the restriction of surrendered CFD capacity. 00:24:57.599 --> 00:25:03.359 Um government is looking at maintaining the current blocker on surrendered capacity. 00:25:03.440 --> 00:25:06.079 Um, so they're not looking to change the current setup. 00:25:06.160 --> 00:25:16.160 Um, this is around permitted reductions and the rule five excluded applications restriction and schedule five eligibility checks within the contract allocation framework. 00:25:16.240 --> 00:25:36.559 Um, they are being proposed to be retained for the next allocation round, given that the benefits are deemed to be the same in terms of

potential savings to consumer costs by preventing any gaming within the scheme and ensuring fairness of allocation of contracts and giving really strong incentives for developers to bid uh to bid sufficiently. 00:25:37.119 --> 00:25:43.119 Uh, next is around excluding applications that only hold a gate one connection offer. 00:25:43.279 --> 00:25:53.440 So this is looking at requiring all applicants of the CFD as a prerequisite for entering the scheme to have a gate two offer in order to be eligible and therefore excluding gate one projects. 00:25:53.599 --> 00:26:08.799 So a really critical piece here of piecing together that huge piece of work around connections reform and then how that relates to the CFD and bringing forward strong and you know projects that are deemed most ready to build and to connect. 00:26:08.960 --> 00:26:11.119 Uh so that was an interesting one to note there. 00:26:11.279 --> 00:26:17.279 Um, we've also seen considerations proposed around hybrid metering for single technology and multiple commercial arrangements. 00:26:17.359 --> 00:26:25.359 Um, so this is something that's already permitted in some cases uh for phased offshore wind projects and also tidal projects. 00:26:25.440 --> 00:26:35.440 Um, but this proposal is looking at allowing hybrid metering for single technology or multiple commercial arrangements under the standard terms and conditions of the CFD contract. 00:26:35.599 --> 00:26:38.559 Um, so that is a potential change coming in. 00:26:38.640 --> 00:26:44.000 And if it were to come in, this change would be um they are proposing this change to be introduced retrospectively. 00:26:44.160 --> 00:26:48.720 So those that already have a CFD would be eligible for um for these changes. 00:26:48.880 --> 00:27:13.039 Uh, there's a few points around commercial parameters for floating offshore wind, and these are looking at bringing the parameters for this technology closer in line with that of fixed foundation offshore wind, um, specifically extending the long stop period for new floating offshore wind projects to 24 months and reducing the required installed capacity uh to 85%, in line with the fixed foundation equivalent. 00:27:13.359 --> 00:27:35.839 And sticking with that theme as well, um, some points around a new category for other deep water offshore wind, um, recognizing that novel hybrid foundation designs may exist that could be suitable for deep water deployments, but they are not currently uh deemed CFD eligible under the existing definitions for um for either floating or deep water offshore wind. 00:27:35.920 --> 00:27:50.240 Uh, so this technology, other deep water offshore wind, would be a subset uh of offshore wind for the purposes of the CFD contract, and any reference to offshore wind, um government has stated would also apply to this new technology. 00:27:50.400 --> 00:27:51.920 So various bits and pieces there. 00:27:52.000 --> 00:27:54.400 There's also some points around visibility of sealed bids. 00:27:54.640 --> 00:28:04.160 Um, so proposals to limit the number of sealed bids that applicants can submit to just one, um, and this would only apply to technologies where government has visibility of those bids. 00:28:04.240 --> 00:28:15.839 Um, and finally, as well, also not noted on the slide, but worth mentioning, um, that government is saying that it won't be going ahead with proposed um suggestions to fix the appeals timeline at this point in time. 00:28:16.000 --> 00:28:17.920 So that could be something we see again in the future. 00:28:18.000 --> 00:28:24.720 Um but for now, these are sort of the main points on the table that we're now awaiting the government response to uh to see what's going to be taken forward. 00:28:25.200 --> 00:28:26.319 Thank you, Lucy. 00:28:28.880 --> 00:28:32.640 So that moves us on to the QA um part of the session. 00:28:32.720 --> 00:28:38.160 So we've already had some questions through, um, so I'll kick this off. 00:28:38.319 --> 00:28:43.680 Um so first one to head through um, which Lucy, I'm gonna provide to you if that's okay. 00:28:43.839 --> 00:28:48.720 Um, what are the impacts of the CFD on suppliers and consumers? 00:28:49.839 --> 00:28:50.799 Yes, of course. 00:28:50.960 --> 00:29:06.720 Um a really good question, because of course we've been focusing on very much the generator and developer side of the CFD, but of course, there's the the inverse of that um in that consumers will ultimately pay for the scheme through the CFD supplier obligation levy on their on consumer bills. 00:29:06.799 --> 00:29:16.240 And so when market prices rise above strike prices, any difference payments made are paid back to the LCC, and those reduce um the levy charge to suppliers. 00:29:16.480 --> 00:29:34.400 Um, in terms of how allocation round seven uh impacts this, we've done some modelling and some analysis at Cornell Insight to see the impact of this outcome of allocation round seven um and how that uh how that could impact uh forecast costs on the consumer bill. 00:29:34.559 --> 00:29:45.359 And so from our initial looking, um, given that, as I've mentioned, a lot of the capacity from AR7 is due to come online sort of later in those delivery years at that 2030-31. 00:29:45.440 --> 00:29:51.839 Um, we're currently expecting that AR7 projects could add around 13% to bills by 2030-31. 00:29:51.920 --> 00:29:58.720 Um, I think starting at a sort of 1% increase from 27-28 and gradually ramping up to that 13% as well. 00:29:58.880 --> 00:30:09.200 So uh the scheme is designed to provide consumers' protections to volatile and high wholesale prices, but equally um consumers do pay for the scheme through that. 00:30:09.279 --> 00:30:18.720 Um, so naturally, when we see more capacity come online, there is uh a knock-on impact on consumer bills, but primarily the point is is giving that consumer bill protection. 00:30:20.720 --> 00:30:21.759 Thank you, Lucy. 00:30:21.839 --> 00:30:28.720 Um, next question we had come

through was uh what would the pipeline look like for offshore wind in AR8? 00:30:29.039 --> 00:30:32.640 Um and Will, it'd be great if I could pass this on to you, please. 00:30:33.440 --> 00:30:34.160 Yeah, sure. 00:30:34.319 --> 00:30:54.559 So um I think as it stands, AR8's offshore wind pipeline will include a growing number of consented and near consented projects, um, with probably floating offshore wind accelerating due to updated CFD rulings that kind of better support deep water and and uh yeah innovative foundations. 00:30:55.279 --> 00:31:01.759 I think it's probably worth also adding that floating projects are expected to play a key role in AR8, as we highlighted in the webinar. 00:31:01.839 --> 00:31:06.400 So this next wave of UK offshore development progresses. 00:31:06.640 --> 00:31:11.839 Um equally, several unsuccessful AR7 projects are also likely to reapply. 00:31:12.000 --> 00:31:18.240 So this will this will ultimately add further further volume to the AR AR8 pipeline. 00:31:18.640 --> 00:31:19.839 Great, thank you, Will. 00:31:20.000 --> 00:31:29.839 Um, next question, uh it's quite an interesting one actually, um, which I'd quite like both of you guys to answer to provide perhaps different perspectives on this. 00:31:30.000 --> 00:31:36.799 Um given the AR7 results, how would you expect this to impact the corporate PPA market moving forward? 00:31:36.960 --> 00:31:39.440 Um Lucy, if we could start with you, please. 00:31:40.079 --> 00:31:45.599 Sure, yeah, and you're right, James, it's a question that um can be looked at from multiple angles. 00:31:45.759 --> 00:31:57.519 I think historically what we know is that the CFD and the outcome of a CFD allocation round, um, those prices, those strike prices, can often be seen as a bit of a benchmark for the wider market. 00:31:57.599 --> 00:32:13.039 And we have seen in the past that um interest in CPPAs, sort of the timings of that, can often relate quite closely to CFD allocation rounds and waiting to see what happens in the CFD to then be able to make a decision um around CPPAs as well. 00:32:13.200 --> 00:32:24.960 Um, however, I think it's probably important to note that allocation round seven has been a competitive auction and we have seen a lot of success with projects, both on a capacity and sort of on a number basis. 00:32:25.039 --> 00:32:30.000 Um that could mean that fewer projects are seeking a CPPA as a route to market from that. 00:32:30.160 --> 00:32:34.160 So, as to how that dynamic will play out, I think that's probably quite an interesting one. 00:32:34.240 --> 00:32:40.880 Um, but I don't know, Will, whether you've got um either sort of points to agree or maybe to to counter those as well. 00:32:40.960 --> 00:32:43.200 But in short, I think it's it's an interesting question. 00:32:43.359 --> 00:32:51.519 And as the CFD matures and as we have these annual allocation rounds, I think that dynamic between the CFD and the CPPA market will shift slightly. 00:32:52.480 --> 00:32:55.039 Yeah, really interesting insight there, Lucy. 00:32:55.119 --> 00:33:01.839 And I think just building on some of the conversations we've had at various conferences and meetings we've generated recently. 00:33:02.079 --> 00:33:03.359 I certainly agree. 00:33:03.440 --> 00:33:12.240 Um, curry, on one hand, that the CFD effectively crystallizes price expectations and really market availability throughout the technologies. 00:33:12.480 --> 00:33:19.039 Over the next six to twelve months, it'll be interesting to see how consumers and large energy buyers compete against the CFD. 00:33:19.279 --> 00:33:42.000 However, on the other hand, um, ongoing, you know, to name a few examples, ongoing uncertainty around GHG protocols updates and timings on final investment decision dates is clearly showing uh slowing down, sorry, CPPA decision making, with many buyers hesitant to commit until they have clarity in how market-based emissions accounting will be treated going forward. 00:33:42.240 --> 00:33:43.920 So that's really my take on it. 00:33:44.079 --> 00:33:48.400 Um I think there's this it's it's an ongoing beast that one. 00:33:48.559 --> 00:33:52.319 So um let's see how it evolves over the next six to five months. 00:33:52.720 --> 00:33:54.400 Yeah, it's great insight from you both. 00:33:54.559 --> 00:33:55.039 Thank you. 00:33:55.279 --> 00:34:00.400 Um next question that's come through, and and Lucy, I'm gonna come to you again on this one. 00:34:00.559 --> 00:34:05.519 Um, just because I I realize you've you've touched on this earlier in the presentation. 00:34:05.680 --> 00:34:09.599 Um, so what happens when projects are refused consent? 00:34:09.840 --> 00:34:17.679 Presumably the support would uh have gone to those projects, does not become available to projects which missed out on AR7. 00:34:20.000 --> 00:34:30.400 Uh yes, so I'm assuming this is around um those offshore wind projects and that's um that relax relaxed eligibility criteria for those um that are pre-planning. 00:34:30.480 --> 00:34:33.840 I think it's it's uncharted territory at the moment. 00:34:34.000 --> 00:34:38.639 We haven't seen, you know, we haven't seen this sort of process work with the CFD before, so we don't know for certain. 00:34:38.719 --> 00:34:47.519 Um, but I would imagine it would just be the case that that project would effectively then drop drop out from that um that sort of that CFD pipeline. 00:34:47.599 --> 00:34:53.840 I I'm not aware of any um sort of protocol in place that would then reallocate that budget. 00:34:53.920 --> 00:35:06.320 I think it would just be the case of a bit like when other projects either terminate their CFD or or don't ultimately um proceed with their CFD, that that's you know, that's then just is removed from the pipeline rather than reallocated elsewhere. 00:35:06.480 --> 00:35:25.039 Um but I think also importantly, now that we know we have annual allocation rounds that perhaps provides a bit more

certainty of if a project is ultimately not successful, um there is then there's a a sort of a more frequent cadence of allocation rounds um that it could then look to re-enter in future. 00:35:26.880 --> 00:35:28.079 Thank you, Lucy. 00:35:28.480 --> 00:35:33.280 Um so we've got a dreaded um government question come through. 00:35:33.440 --> 00:35:37.440 So, Will, I know you've been looking into this a little bit, so I'm gonna pass this on to you. 00:35:37.599 --> 00:35:46.400 Um, what's the political risk that progress might be halted in an unsympathetic government uh is elected in a SNAP election? 00:35:47.679 --> 00:35:48.880 Yeah, thanks, James. 00:35:49.039 --> 00:36:01.599 Um yeah, there's been there's been lots of recent comments from the the reform party indicating that the party would seek to scrap the CFD scheme entirely if elected, which I think everyone's aware of and it's cool. 00:36:01.840 --> 00:36:11.679 That's the success of this latest allocation round only reinforces how essential the CFD mechanism is to delivering affordable low-carbon power. 00:36:11.920 --> 00:36:17.280 And I think regard regardless of this political debate, Smartest Energy's position remains clear. 00:36:17.440 --> 00:36:27.199 Like long-term policy stability is essential for maintaining investor confidence and really enabling the continued growth of UK renewables, which is extremely important. 00:36:27.519 --> 00:36:36.079 And we will continue to support our customers by helping them navigate policy uncertainty and really assess the implications for project economics and reach the market. 00:36:37.119 --> 00:36:45.360 So I think that that's a question we could probably talk about for a long time, but it's a snapshot of of um of of what we're seeing at the moment. 00:36:47.280 --> 00:36:48.239 Thank you, Will. 00:36:48.480 --> 00:36:50.559 Um next question. 00:36:50.719 --> 00:36:53.920 Um Lucy, I wonder if you've could provide some insight. 00:36:54.000 --> 00:36:58.000 Um any guesses from when CFD AR eight will open? 00:36:58.079 --> 00:37:01.519 Do we expect it to be similar timelines to AR seven? 00:37:02.800 --> 00:37:04.079 Another very good question. 00:37:04.239 --> 00:37:14.559 Um I think we we haven't heard anything firm, but I think almost sort of calculating backwards, we know that government has committed to annual CFD allocation rounds. 00:37:14.639 --> 00:37:20.719 Um, and equally, allocation round seven operated on a slightly longer timeline than we were perhaps initially expecting. 00:37:20.800 --> 00:37:21.920 There were some delays there. 00:37:22.079 --> 00:37:24.559 So um we know we know that. 00:37:24.719 --> 00:37:29.519 Equally, we know that we uh are awaiting that response to the AR8 consultation on those changes. 00:37:29.679 --> 00:37:42.159 So I would expect, firstly, the fact we know that there is a response coming soon means that we know that government is working on AR8, but also there's likely to be a bit of a kind of a setting out in that of potential timelines. 00:37:42.320 --> 00:37:52.079 So I think I would say with that, um, that I would expect, given that we haven't heard anything to say otherwise, that we would expect a sort of similar timeline as this year. 00:37:52.239 --> 00:38:00.880 Equally, government positioning and sort of industry positioning across NISO and off-gem is very much focused around delivery of clean power 2030. 00:38:01.039 --> 00:38:12.159 So it will be within all the sort of the best interests of all parties and industry bodies to ensure that the CFD continues to um continues to develop as as promptly as possible. 00:38:12.320 --> 00:38:30.159 So um perhaps a bit of a long-winded answer there to say, in short, I don't know, but I think um it as things currently stand, we could have probably expect sort of sometime later in spring and summer um for things to kick off, but ultimately a bit more direction of travel um from governments probably in the coming months around when that's specifically when that could happen. 00:38:30.559 --> 00:38:31.119 That's great. 00:38:31.199 --> 00:38:32.000 Thank you, Lucy. 00:38:32.159 --> 00:38:37.119 Uh, and and I guess to note on that, um Smartest will be making publications along the way as well. 00:38:37.199 --> 00:38:45.039 Um so do keep an eye out for um for our publishings, um, and we'll keep you informed as we can on the timelines. 00:38:46.079 --> 00:38:52.400 Um next question, and sorry Lucy, I'm gonna come to you again. 00:38:52.639 --> 00:38:57.119 Um Will bidders have to have accepted gate two offers? 00:38:57.360 --> 00:39:04.400 Uh there is a risk some projects will not accept their final offers once they know what their connections cost was gonna be. 00:39:06.159 --> 00:39:14.079 Yeah, so this is something I've been discussing sort of internally at Cornwall Insight and with um market participants as well. 00:39:14.159 --> 00:39:22.079 I think on those proposals, it was around having that gate to offer in place to be able to enter the CFD. 00:39:22.239 --> 00:39:28.239 Um, now, interestingly, that consultation I believe came out sort of at the middle to end of December, I think. 00:39:28.400 --> 00:39:37.440 Um, and we have since seen communication from NISO around uh not insignificant delays to some of those um gate to offers being um being issued. 00:39:37.679 --> 00:39:40.719 So um we haven't heard anything specifically on that point. 00:39:40.800 --> 00:39:52.880 Um and I think naturally now, given that we've had that bit more information from NISO, I would hope to see some information from government perhaps in that consultation response on those AR8 changes as to exactly how that could work. 00:39:53.039 --> 00:39:58.880 Um naturally, you know, the the connections reform piece of work is a bit of a moving beast of itself. 00:39:59.039 --> 00:40:02.639 So um we I think we just have to wait and see on that front. 00:40:02.800 --> 00:40:08.239 But um at the moment, all we can see

is those proposals from government and and any communications that come from NISO. 00:40:10.960 --> 00:40:12.079 Thank you, Lucy. 00:40:12.239 --> 00:40:18.320 Um I think we've got time for one more question, um, although there are quite a few more on here. 00:40:18.480 --> 00:40:25.360 So any questions that don't get answered, um we'll email responses around uh following the webinar. 00:40:25.519 --> 00:40:29.760 So uh last question, um, which which I can I can tackle. 00:40:29.920 --> 00:40:38.800 So um given the ARC and clearing prices, what levels of route to market discounts uh might might you expect to see? 00:40:39.039 --> 00:40:48.400 Um I guess uh around this question, um I think the the market discounts are quite low uh to discounts to IMRP at the minute. 00:40:48.559 --> 00:40:51.440 Um, you know, it's it's a competitive market for this. 00:40:51.599 --> 00:41:00.159 Um, you know, specifically if you have any projects, uh, you know, do reach out to us and we can provide you with some some accurate numbers on there. 00:41:01.519 --> 00:41:03.280 Um so that's all we've got time for. 00:41:03.360 --> 00:41:07.039 Um so I'm gonna be bringing the webinar uh to a close. 00:41:07.119 --> 00:41:11.280 Um but before I do, big thank you to Lucy at Cornwall for joining us. 00:41:11.360 --> 00:41:20.480 Um I'm gonna provide you with a uh a minute quickly before we um wrap up just to provide an overview of the Cornwall for services. 00:41:21.119 --> 00:41:21.760 Thank you, James. 00:41:21.840 --> 00:41:24.239 And yeah, thank you for having me on your webinar this morning. 00:41:24.320 --> 00:41:31.199 Um just to flag that Cornwall Insight has a range of different forecasts and subscription services around uh routes to markets. 00:41:31.280 --> 00:41:42.480 So um, if you're looking to engage in the CFD scheme, we have an ongoing CFD support service uh to support you through that process and give kind of guidance of navigating an allocation round. 00:41:42.719 --> 00:41:55.280 But we also have uh historic sort of backing in both network charging forecasts and uh wholesale power price forecasts, so our network charging forecast covering both transmission and distribution charges. 00:41:55.440 --> 00:42:04.960 Um, that has been these has been banked and used in financial transactions across GB, and we've recently revamped that service to make that uh even easier for our customers to use. 00:42:05.039 --> 00:42:07.760 So if you are keen to discuss that, we're more than happy to help. 00:42:07.920 --> 00:42:20.800 And finally, just to note that renewables and power markets forecast service, um, which is our bankable long-term wholesale and capture price scenario view, um, but also with route to markets and business model analysis uh presented in commute uh commercial due diligence format. 00:42:20.880 --> 00:42:25.920 So if you're interested in hearing more about those, feel free to get in contact with myself or through the links on the slides there. 00:42:26.000 --> 00:42:29.440 Um and yes, thank you again for having me on your webinar this morning. 00:42:30.559 --> 00:42:30.960 Thank you. 00:42:31.119 --> 00:42:34.159 Uh thank you, Will, and thank you again from us. 00:42:34.320 --> 00:42:36.559 Um just a last note from me. 00:42:36.719 --> 00:42:49.840 Um, if you do have any route to market um under your auction current auction rounds or previous auction rounds, do feel free to get in touch or any further information, email ppa at smartisenergy.com. 00:42:50.159 --> 00:42:52.639 Thank you again and have a great day. 00:42:52.960 --> 00:42:53.679 Bye bye. 00:42:54.000 --> 00:42:54.400 Brilliant. 00:42:54.559 --> 00:42:55.280 Thanks, guys. 00:42:55.440 --> 00:42:56.480 Bye bye.