Renewable energy Contract for Difference Research

Tender description

***** THIS IS AN AWARD NOTICE, NOT A CALL FOR COMPETITION ***** This procurement is being concluded following a mini competition via an Open market tender. Brief Description of Requirement The application, purpose, outcome, or function of the services: - This project is about understanding the potential impacts of valuing Non-Price Factors (NPFs) in the Contracts for Difference (CfD) scheme (the government's main renewable energy support scheme). - Emerging challenges this could help tackle include: a) supply chain challenges (increased supply chains disruption from Covid then war in Ukraine; surging global demand for renewable energy but insufficient manufacturing capacity; UK and European supply chains facing pressure in global markets), as well as b) the need to integrate an increasing proportion of variable renewables on the grid. This includes increasing system flexibility, retaining system operability and providing efficient locational signals to minimise system cost, mean that the CfD auction needs to evolve. Non-Price Factors is one of the CfD evolution options that is being considered as part of this evolution. - Currently, both CfD allocation and the value of contracts awarded (reflected in strike prices) are the product of a competitive auction purely based on cost. Amending the scheme to value other factors in some way would require material amendments, including possibly to auction structure and design. - Since this is a significant reform to a complex government policy, we need to understand a number of impacts associated to this policy namely: Value for Money (VfM) implications for electricity consumers; NPF impacts on auction outcomes (including any unintended consequences); impact on supply chains; and on wider system integration and flexibility. The implications for the users of implementing