DESNZ consults on regulatory reform to the Clean Industry Bonus scheme

The Department for Energy Security and Net Zero (“DESNZ”) is currently consulting on proposed regulatory reforms to the Clean Industry Bonus (“CIB”) scheme ahead of Allocation Round 8 (“AR8”) which is part of the Contracts for Difference (“CfD”) process (the “Consultation”). Following the strong response to the CIB during Allocation Round 7 (“AR7”), the Consultation seeks views from stakeholders to help address operational issues that were identified during AR7, as well as on the extension of the CIB scheme to cover onshore wind as well. The Consultation (which is available here) will remain open for responses until 6 October 2025.

The Clean Industry Bonus

The Clean Industry Bonus falls within the Contracts for Difference scheme, by which the UK Government supports the deployment of low-carbon electricity generation projects in Great Britain. By covering the cost difference of the more expensive supply chain investments, the CIB scheme aims to reward offshore wind developers who make additional investments in cleaner and more sustainably supply chains.

To be eligible for the CIB scheme, an applicant must meet the CIB minimum standard of investment in supply chain sustainability, which is currently an investment of at least £100m/GW for fixed-bottom offshore wind farms or £50m/GW for a floating offshore wind farm. In addition, that investment has to meet the following two sustainable criteria:

• Criterion 1: Investment in shorter supply chains – if an investment is made in an offshore or floating offshore wind manufacturing facility, installation firm, or port that is located in a UK deprived area.
   
• Criterion 2: Investment in cleaner supply chains – if an investment is made in offshore or floating offshore manufacturing facilities or installation firms owned or operated by firms that can evidence having set or committed to a Science Based Target.

Workforce protection

The Consultation’s first proposal is a focus on workforce protection in the offshore wind supply chain. It is proposed that the CIB scheme is used to encourage fair employment practices in offshore wind, in response to concerns about labour standards, lack of diversity and limited union access in certain parts of the sector. In line with the UK Government’s aim for AR8 to encourage commitment, it proposes discussions on a new ‘offshore wind fair work charter’ to be implemented through the CIB scheme; DESNZ expects the fair work charter to cover commitments on pay, job security, health and safety and overall worker wellbeing.

The Consultation includes the following two alternative enforcement options to incentivise developers to engage with the fair work charter:

• Option 1: It would be a requirement for every developer bidding for the CIB scheme to publicly commit to fair work charter discussions (and any early agreed actions) as part of the CIB minimum standards. This would effectively make fair work charter discussions and participation on agreement a prerequisite to access the CIB scheme with the application of a consequential financial non-delivery disincentive for non-participation in the discussions and/or a failure to meet any early commitments agreed.
   
• Option 2: It would be a condition to receiving any CIB bonuses that the developers publicly commit to discussing the fair work charter talks (and any early agreed actions). This would mean that a developer can choose to not commit to the fair work charter talks and still participate in the CfD process, however they would be ineligible for the CIB scheme and the related bonuses.

Similarly, the Consultation sets out two options that aim to incentivise suppliers to also engage in the fair work charter. The first option proposed is similar to that proposed for developers, being to require supply chain companies to publicly commit to the fair work charter discussions as a condition for being included in a developer’s CIB plan. This is a relatively broad option, which could push most suppliers to engage in the discussions. The second option would be to link the fair work charter to the Industrial Growth Plan (“IGP”) funding that suppliers can receive from developers’ contributions to the IGP Delivery Body. This would mean that non-participating suppliers could still take part in projects, however they will miss out on funding.

Skills investment proposals

Another proposal in the Consultation is to introduce a skills development criterion into the CIB scheme, with the aim of addressing the current need for a larger skilled workforce in order to achieve the Clean Power 2030 Action Plan. The Consultation sets out the following two alternative options that could introduce the skills criterion to the CIB scheme, as part of the CIB minimum standards:

• Option 1: Developers could be incentivised to contribute towards a “skills investment fund” that encourages a more collaborative approach. This option could assist the industry with channelling investment to where it is most needed but DESNZ recognises that developers would lose control of the monies they contributed to the skills investment fund and indeed may not ultimately benefit from the monies they had provided. The skills investment fund would be administered by a third party, and the Consultation mentions that the IGP Delivery Body, which already manages strategic investments, could be well-placed to administer the skills fund. If this option is chosen, it may be required during AR8 that each developer allocates a fixed portion of the CIB minimum spend into the skills fund.
   
• Option 2: Developers could be incentivised to invest in skills at the project level. This would require developers to make direct investments into training and skills development within their own project, which would be considered a CIB minimum standard contribution. The Consultation provides a list of suggested activities which would be eligible for the CIB minimum standard obligation, which includes supporting education attainment and providing work experience or internships. In contrast to option 1, option 2 would allow developers to channel their investments into activities which may produce direct benefits for the developer’s own current or future projects.

Inclusion of onshore wind

The Consultation is seeking views as to whether onshore wind projects could be included in the CIB scheme in future allocation rounds, which until now, has been exclusive to offshore (fixed-bottom and floating) wind. As the UK Government aims to strikingly increase its onshore wind capacity, extending the CIB scheme to onshore wind would assist with achieving that commitment. This also aligns with broader government policy, such as the recent uplifting of the onshore wind ban in England.

The Consultation is seeking views as to whether the CIB scheme should be extended to onshore wind projects as early as AR8, or whether the extension should be delayed until AR9. Including onshore wind earlier in AR8 could assist with creating better momentum in the onshore wind supply chain. On the other hand, delaying onshore wind to AR9 would give the industry more time to understand the CIB scheme and process, which is more likely to result in stronger bids. The Consultation recognises the different technical components for onshore wind and offshore wind, and it is proposed that a different list of components be used for onshore wind projects that seek funding. It is also proposed that if onshore wind projects are introduced into the CIB for AR8 they would only be required to meet either of the first two criteria introduced in AR7, being short supply chains and sustainable supply chains. In addition to reflect differences in project costs and supply chains for onshore wind projects, the Consultation proposes;

• that the minimum standard for onshore wind projects could also be set lower than for offshore wind projects at £25m/GW, approximately 2% of project construction costs.
   
• to apply the CIB minimum standard requirement only to projects above a generation capacity threshold of 100MW which want to enter the CfD round. Projects below a 100MW capacity are able to apply for additional funding through the CIB, but they would need to meet the minimum standard as part of their application.
   
• to create a separate sub-budget for onshore wind within the budget of the CIB in the same way as there is a sub-budget which ringfences funds for Floating Offshore Wind in the current CIB’s primary budget for all bids.

Process improvements

Following the first round of the CIB scheme, DESNZ identified a number of areas for improvement in the process:

• Timelines – The Consultation proposes that a faster timeline is introduced for AR8 than the current statutory deadlines. This will aim to reduce the overall time between a CIB round notice and a CfD round, for example, by allowing the CfD window to open as soon as reasonably practicable rather than 4 months after the CIB application window (which is the current statutory requirement). As well, the Consultation proposes that the Allocation Framework must specify each round when the notices related to a CIB application open. If all the proposals are implemented, the current estimate is that the CIB round will open in early March 2026 for AR8.
   
• Budget – The current regulations require DESNZ to set a provisional budget for a CIB allocation round, ahead of the CIB round with the final budget announced within 3 weeks of the CIB round closing. The AR7 CIB budget made provision for a sub-budget that was dedicated to supporting investments in floating offshore wind specifically. Rather than competing against fixed offshore wind bids, this meant that floating offshore wind would compete against other floating offshore wind projects for a ring-fenced budget. The Consultation proposes making the use of sub-budgets a formal part of the CIB application process. In addition, the Consultation proposes to include provisional and final budget notices in absolute terms, rather than in £m/GW terms, to avoid any confusion with applicants.
   
• Events outside a generator’s control – The AR7 Guidance covered the process where a generator cannot deliver their CIB commitment due to unforeseen circumstances outside of their control, which included proposing alternative minimum standard investments and allowing as a last resort the Secretary of State to deem a generator to have met minimum standards when a CIB commitment was not so delivered. The Consultation proposes making this a standard principle in regulations, including the Secretary of State’s power to deem a generator to have met minimum standards in the absence of an investment, where this is due to events outside of their control.
   
• Sunset clause – The current regulations provide that the CIB can be used in the seventh, eighth or ninth CfD allocation rounds. The Consultation proposes extending this, so that the CIB applies to any rounds that open before 31 December 2028, to align the CIB scheme’s timeline with the UK Government’s clean power mission.
   
• Payment on delivery – CIB payments are currently released to generators once the project has been commissioned and CfD payments have begun. The payment amount and frequency of the CIB payments are determined by the Low Carbon Contracts Company to ensure that the full amount is received by the end of the fourth year after the CfD Start Date. This means that applicants will receive the CIB payments 1-3 years after the relevant investment has been made. The Consultation considers two options to improve the payment timeline: By either allowing payments to be made before the CfD Start Date on release of the Implementation Statement (i.e. payments can be made once all relevant investments have been made) or by allowing payments to be made before the CfD Start Date upon a conditional Implementation Statement that shows that the total share of the CIB investments from the generator has been made. In both options, payment would be made in full to the generator no later than the current end of 4^th year timescale.
   
• Project-level bids – The Consultation notes that the policy intention for the CIB was for each offshore or floating offshore wind project to prepare one application and be released with one CIB Statement. However developers often split large offshore wind projects into several CfD units, this resulted in developers being required to complete several CIB applications per project. Recognising that this significantly increased the administrative burden for developers, suppliers and government alike, DESNZ are considering creating the option for project-level bids. The Consultation sets out the proposal that;

“for fixed and floating offshore wind, this would mean multiple CfD units in the same leasing zone could put forward a single CIB application. The applicant would not have to specify number or size of units at CIB application stage; though they will have to communicate to DESNZ the names and sizes of all units prior to the CfD auction round opening, so these can be added to the CIB Statement, for NESO to be able to complete checks.”

Next steps

The Consultation invites responses from stakeholders in onshore and offshore wind on several areas as discussed above. This Consultation remains open until 6 October 2025, after which the government response can be expected in November 2025. Where necessary, legislation is currently estimated to be drafted later in the year to come into force by February 2026. In addition to this Consultation, further consultation on the non-regulatory aspects of the CIB scheme can be expected from now until the end of this year.

Co-authored by Sofie Santry (Associate at CMS)