Contracts for Difference (CfD) Allocation Round 8: statutory notices

What this is about

DESNZ has published the statutory notices that formally open CfD Allocation Round 8. Two documents matter: the AR8 Allocation Round Notice (the standard legal trigger for the round) and the Clean Industry Bonus Framework Notice, which sets out how the CIB will operate alongside the standard CfD mechanism.

The CIB is new. It is a supplementary payment on top of the CfD strike price, available to generators that meet domestic supply chain content thresholds. This makes AR8 structurally different from previous rounds. AR1-7 were administered price guarantees for low-carbon generation. AR8 is an administered price guarantee with an industrial policy subsidy bolted on top. The cost of both layers falls on electricity consumers through the Supplier Obligation.

Key points

The CIB mechanism. The Clean Industry Bonus pays a per-MWh premium above the strike price to projects that demonstrate sufficient UK supply chain content. This is not a one-off capital grant or a planning condition. It is a recurring revenue stream, paid for the duration of the CfD contract, funded by the same Supplier Obligation that funds the strike price itself. The premium is contingent on meeting content requirements verified through the Supply Chain Plan process.

Two layers of administered price. A standard CfD already removes the generator from the wholesale price signal. The strike price is set administratively; the generator receives the difference between the strike price and the reference price regardless of when or where it generates. The CIB adds a second administered layer: a bonus payment conditional not on generation performance but on procurement decisions. The generator's revenue now depends on two government-set parameters (strike price and CIB rate) rather than one.

Who benefits. Supply chain content requirements favour large developers with established domestic procurement relationships. A multinational with an existing UK turbine supply agreement can demonstrate content with minimal additional cost. A smaller developer importing components, potentially at lower cost, faces a choice: accept a lower revenue stream or restructure procurement to qualify for the bonus. The CIB is regressive across the developer population. It rewards scale and incumbency.

Who pays. Electricity consumers, via the Supplier Obligation. The CIB is funded through the same mechanism as the CfD itself. Suppliers pass these costs through to bills. There is no separate budget line, no Treasury appropriation, no parliamentary vote on the quantum. DESNZ has effectively created a new levy on electricity consumption to fund industrial policy, using the CfD infrastructure as the collection mechanism.

The supply chain plan process. Projects bidding into AR8 must submit Supply Chain Plans demonstrating how they will meet content thresholds. These plans are assessed by DESNZ before projects can participate in the auction. This is an additional administrative gate on top of the standard CfD qualification criteria (planning consent, grid connection agreement, financial commitment milestone). It adds time, cost, and uncertainty to project development, and the assessment criteria are set by the department rather than by the market.

Auction design implications. The CIB changes bidding incentives. A developer confident of qualifying for the bonus can bid a lower strike price, knowing the CIB tops up their revenue. This could depress headline strike prices in AR8 results, making the round appear cheaper than it is. The true cost to consumers is the strike price plus the CIB payment, but these will likely be reported separately.

What happens next

The statutory notices are the formal starting gun. The key dates to watch are:

- Application window. Projects must submit qualification applications including Supply Chain Plans. The assessment and approval process will filter which projects can bid. - Auction. Sealed-bid pay-as-clear auction, same format as previous rounds. The budget and administrative strike prices (ceiling prices) for each pot will constrain outcomes. - Results and contract signing. Successful projects receive CfD contracts with the CIB entitlement reflected in their terms.

The substantive questions are whether the CIB rate is large enough to change procurement behaviour (its stated purpose) or merely transfers additional consumer money to projects that would have used domestic supply chains anyway (deadweight loss), and whether the Supply Chain Plan assessment creates a bottleneck that delays or excludes projects that would otherwise have cleared the auction.

AR8 results will need to be read carefully. The headline strike price will not represent the full cost to consumers. The CIB payment must be added to get the true administered price. Any comparison with AR7 or earlier rounds that ignores the CIB will understate the cost of AR8.