I thank the noble Baroness, Lady Worthington, and the noble Lord, Lord Howell, for their amendments. I say at the outset that the CfD model will remain an important tool in the armoury of financing options to encourage investment in green energy, although I understand that the point of these amendments is to preserve its integrity.
Amendment 61 seeks to make the signing of a contract for difference—known as a CfD—mandatory for a renewable electricity project that has successfully bid for one in a competitive CfD allocation round. I point out, however, that the Energy Act 2013 already contains, in Section 14(2)(d), powers very similar in effect to the amendment. Section 14(1) of the 2013 Act provides for a CfD counterparty, acting in accordance with provisions made by regulations, to offer to contract with an eligible CfD generator. Section 14(2) of the Act allows for regulations to be made that make further provision about an offer to contract, including, at Section 14(2)(d), provision about what is to happen if the eligible generator does not enter into a CfD as a result of a contract offer. Successful applicants for a renewable electricity CfD are expected to enter into a contract with the Low Carbon Contracts Company if offered one following a CfD auction. Those who do not are excluded under Regulation 14 of the Contracts for Difference (Allocation) Regulations 2014, as amended, from submitting an application at the same site for a specified number of future CfD allocation rounds—an “excluded site”. The 2014 regulations were made under the powers in Section 14 of the Energy Act 2013.
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The purpose of this exclusion mechanism—commonly referred to as the non-delivery disincentive, or NDD—is to deter speculative bids and incentivise successful CfD applicants to sign contracts and deliver operational renewable power stations within a set timeframe. The NDD has been very effective in discouraging non-compliance across the four CfD allocation rounds held to date between 2015 and 2022. I am informed that only three small projects, totalling 41 megawatts, have refused to sign a CfD contract, out of the
26.6 gigawatts of capacity that has so far been awarded. I am afraid I do not have a specific answer on the three wind farms that the noble Baroness mentioned. If I can get further details, again, I shall put that in writing for the Committee.
The 2014 regulations were amended as recently as this July to extend the exclusion period so that an application cannot be made in respect of an excluded site in the subsequent two applicable allocation rounds, strengthening the previous policy of excluding a site from only one subsequent allocation round. I draw the attention of the Committee to the Contracts for Difference (Allocation) and Electricity Market Reform (General) (Amendment) Regulations 2022.
We have already announced that we will move to annual CfD auctions, bringing forward the next round to March 2023. The Government therefore believe that the current legal provisions that exclude non-compliant applicants are proportionate and effective, and do not require further strengthening.