The Subsidy Advice Unit (SAU) has published a report providing advice to the Department for Energy Security and Net Zero (DESNZ) concerning its proposed Contracts for Difference (CfD) Scheme Allocation Round 8 (AR8).
Administrative timetable
| Date | Action |
|---|---|
| 4 September 2026 | SAU’s report published |
| 12 August 2026 | Deadline for receipt of any third-party submissions |
| 29 July 2026 | Beginning of reporting period |
Final report
4 September 2026: The SAU has published its report providing advice to DESNZ concerning the proposed CfD Scheme AR8. The report sets out the SAU’s evaluation of DESNZ’s Assessment of Compliance of its proposed scheme with the requirements set out in the Subsidy Control Act 2022.
- Final report (4.9.26)
Request from DESNZ
29 July 2026: The SAU has accepted a request for a report from DESNZ concerning the proposed CfD Scheme AR8. This request relates to a Subsidy Scheme of Particular Interest.
The SAU will prepare a report, which will provide an evaluation of the DESNZ assessment of whether the subsidy 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 and aims to encourage low carbon electricity generation. CfDs are long-term (15 or 20 year) contracts between a low carbon electricity generator and the CfD counterparty - the Low Carbon Contracts Company (LCCC). This is the eighth allocation round (AR8) of the Scheme.
Under the Scheme, the generator sells its electricity at a variable market price. When the reference price (a proxy of the wholesale electricity price) is below the strike price agreed in the CfD contract, the generator receives a top-up payment from LCCC for the difference (funded by a levy on electricity suppliers). When the reference price is above the strike price, the generator must pay back the difference to LCCC.
CfD contracts are typically awarded through a competitive allocation round, where companies submit bids in relation to new generation capacity, and the lowest bids are accepted until the overall budget for the allocation round is reached.
AR8 opened to applications on 20 July 2026 from any eligible renewable electricity generating station being or to be built in Great Britain. Eligible electricity generating technologies include advanced conversion technologies, anaerobic digestion, dedicated biomass with combined heat and power, energy from waste with combined heat and power, floating offshore wind (FLOW), other deepwater offshore wind (ODOW), geothermal, hydro, landfill gas, offshore wind, onshore wind, repowering onshore wind, remote island wind, sewage gas, solar photovoltaic, tidal stream, and wave. These technologies must meet certain size and type requirements to be eligible for the Scheme.
In each allocation round, DESNZ sets an administrative strike price for each eligible technology, which is the maximum strike price that a project can receive for generating electricity. DESNZ sets these administrative strike prices based on cost information for the technology. For AR8, the administrative strike prices will be published alongside the pot structure and delivery years. The clearing price for each technology is set at the level of the final accepted bid in the competitive auction, and must be less than or equal to the administrative strike price for that technology.
DESNZ will publish the initial budget for AR8 ahead of the sealed bid window. Pots 1-4 will be subject to bid stack visibility where the initial budget can be increased after the sealed bid window, at which time DESNZ will publish the final contract budget. This contract budget will represent the yearly budget over the relevant valuation period, with successful projects receiving subsidy over a 15- or 20-year period. Pot 5 will not be subject to this budget revision process; instead, the budget published ahead of the sealed bid window will represent the yearly budget cap for projects competing within this technology pot. An estimate will be provided for the total subsidy amount on the transparency database in due course. DESNZ estimates that the total lifetime subsidy amount for contracts awarded in AR7 is £40 billion (2024 prices, rounded to the nearest £5 billion), and the largest estimated subsidy amount for any of the contracts awarded under AR7 is £6 billion (2024 prices, round to the nearest billion). This should not be taken as an indication of scale for future allocation rounds. The estimated total subsidy amount and estimated maximum subsidy amount for any individual contract for AR8 may be significantly lower or higher than this figure. Additionally, these estimates are highly uncertain as actual payments will depend on wholesale electricity prices at the time and the amount of electricity generated by successful projects. Importantly, the total subsidy amount is not the same as the net impact on consumer bills of an allocation round, and in particular, does not reflect the offsetting downward pressure that renewables place on the wholesale price.
A number of changes have been made to the existing Scheme for AR8, following a consultation:
- policy on surrendered CfD capacity – making permanent the restriction on bidding previously surrendered capacity into future rounds to protect auction integrity and deployment timelines
- excluding applications with Gate 1 connection offers (defined as offers that only provide a provisional connection date and general location. They do not reserve capacity in the queue or guarantee a fixed timeline) – aligning CfD eligibility with grid connection reforms to prioritise projects with firm connection dates
- introducing a new technology category for Other Deepwater Offshore Wind (ODOW) – enabling innovative foundation designs for deepwater sites to compete for CfD support
- visibility of sealed bids – changing our approach to the ability of the Secretary of State to see some bid information for AR8.
- hybrid metering for single technology/multiple commercial arrangements – enabling CfD and merchant assets of the same technology to share metering infrastructure, reducing costs
- contractual changes for floating offshore wind (FLOW) – extending the Longstop Period and reducing the Required Installed Capacity threshold to reflect the scale and complexity of future projects
- preventing delayed CfD start dates – improving metering access and enforcement to prevent distribution-connected generators from delaying CfD start dates and operating on a merchant basis at elevated wholesale prices
- removal of default bids – removing the rule requiring assignment of default bids at the Administrative Strike Price
- minor and Technical changes to the CfD contract terms – updating the CPI inflation factor in the CfD Standard Terms and Conditions and amending the definition of Inside Information
Information for third parties
If you wish to comment on matters relevant to the SAU’s evaluation of the Assessment of Compliance concerning the CfD Scheme AR8, please send your comments on or before 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.
Please send your submissions to the public authority: contractsfordifference@energysecurity.gov.uk.
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 make or 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.
Contacts
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Updates to this page
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Final report published.
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First published.
Facts Only
* The Subsidy Advice Unit (SAU) published a report on September 4, 2026, concerning the proposed CfD Scheme Allocation Round 8 (AR8).
* The SAU's report evaluates DESNZ’s assessment of compliance with the Subsidy Control Act 2022.
* A request was made by DESNZ to the SAU on July 29, 2026, for a report concerning CfD Scheme AR8 related to a Subsidy Scheme of Particular Interest.
* CfDs are long-term contracts (15 or 20 years) between generators and the Low Carbon Contracts Company (LCCC).
* Generators receive top-up payments if the reference price is below the strike price, and must repay the difference if it is above.
* AR8 applications opened on July 20, 2026, for eligible renewable electricity generating stations in Great Britain.
* Eligible technologies include solar photovoltaic, offshore wind, and tidal stream.
* DESNZ sets administrative strike prices based on technology cost information for AR8.
* The scheme includes changes such as a policy on surrendered CfD capacity and the exclusion of applications with Gate 1 connection offers.
* The SAU must ensure submissions are shared with DESNZ and requires express consent for sharing submissions.
Executive Summary
Full Take
The structure surrounding AR8 demonstrates a complex interplay between regulatory oversight, market mechanism design, and administrative procedure. The process involves the setting of administrative strike prices by DESNZ based on cost information, which then feeds into the competitive allocation round where clearing prices are determined. This setup creates an intermediary layer—the CfD contract—which mediates between wholesale electricity prices and guaranteed revenue for generators. The subsequent evaluation by the SAU regarding compliance with the Subsidy Control Act 2022 introduces a crucial external accountability check on the subsidy mechanism itself, moving beyond mere technical allocation toward legal adherence.
A significant pattern emerges in the modifications made to the scheme for AR8: changes are implemented across multiple dimensions—capacity rules (surrendered capacity), eligibility criteria (Gate 1 offers), technology inclusion (ODOW), and contractual terms (FLOW adjustments). This suggests that iterative refinement is necessary to align market deployment with evolving regulatory priorities, aiming to balance deployment timelines with auction integrity. Furthermore, the process of requesting and sharing third-party submissions signals a tension between operational secrecy and public accountability regarding subsidy decisions. The uncertainty explicitly noted regarding lifetime subsidy estimates highlights the difficulty in quantifying the true economic impact versus the aggregate financial figures presented for future rounds.
The real implication lies in how this administrative scaffolding manages the inherent tension: ensuring that contracts reflect market reality while simultaneously satisfying legal constraints on subsidies. The shift towards specific technological categories, like ODOW, points toward regulatory efforts to accommodate novel deployment methods. The repeated need for post-hoc review by an independent body suggests that the complexity of long-term subsidy schemes requires continuous scrutiny to prevent unintended outcomes, particularly regarding cost reflection and public benefit measurement.
Bridge Questions: What are the precise mechanisms by which the SAU assesses compliance with the Subsidy Control Act 2022 in relation to the specific changes made for AR8? How do the uncertainty ranges in lifetime subsidy estimates influence stakeholder expectations about future allocation rounds? What systemic adjustments could be implemented to streamline the process of incorporating technological innovation while maintaining strict adherence to auction integrity rules?
Sentinel — Human
This text appears to be a formal advisory report summarizing the timeline and procedural details surrounding the UK's Contracts for Difference scheme, characteristic of official governmental communication.