UK government publishes key AR7 documents and final response to consultation
The Department for Energy Security & Net Zero (the “Government”) published the much-anticipated key documents for Contracts for Difference (“CfD”) Allocation Round 7 (“AR7”) on 24 July 2025. These include:
- the Contract Allocation Framework (“Allocation Framework”);
- the CfD AR7 Standard Terms and Conditions (“STCs”); and
- the Statutory Notices.
This follows the Government’s final response (the “Response”), published on 15 July 2025, to the policy proposals set out in its earlier consultation on reforms to the broader CfD scheme and AR7[1]. The consultation itself ran from 21 February to 21 March 2025 (the “Consultation”).
Key updates to the CfD scheme include:
- Relaxation of eligibility criteria for fixed-bottom offshore wind (“FBOW”) projects to allow CfD applications to be made prior to obtaining full planning consent.
- Targeted support for floating offshore wind (“FLOW”) by introducing phased CfDs.
- Extension of the CfD contract length from 15 to 20 years for key technologies, including FBOW, FLOW, onshore wind, and solar.
- Extension of the Target Commissioning Window for solar PV projects above 5MW to 12 months from 3 months.
- Introduction of repowering rules for onshore wind projects.
- Introduction of a temporary restriction that prevents capacity surrendered from previous CfD allocation rounds (rounds 1 to 6) from being re-bid into AR7.
- Increased Administrative Strike Prices for onshore wind, offshore wind, and tidal stream, now set in 2024 prices.
- A separate clearing price and an additional delivery year for Scottish FBOW projects.
Relaxing CfD eligibility criteria for FBOW projects
The Government confirmed the relaxation of the CfD eligibility criteria for fixed-bottom offshore wind projects by removing the requirement to secure full planning consent (i.e., a formal decision notice granting consent) prior to application. Instead, applicants must confirm that no relevant planning consent has been refused (unless overturned on appeal) as of the application date. This confirmation must be supported by a signed director’s declaration submitted shortly before the bid deadline. To address non-delivery risks, projects must also have achieved the following planning milestones at least 12 months before the CfD application deadline.
- In England and Wales: Development Consent Order (“DCO”) applications must have been accepted for examination by the Planning Inspectorate.
- In Scotland: Public consultation on the submitted Section 36 consent and marine licence applications must have commenced.
This aims to increase auction participation and competition. With more projects bidding, developers are expected to be incentivised to offer lower strike prices, thereby reducing the cost of supporting new renewable generation. The Government acknowledges the revised criteria may not suit non-DCO projects and will consult on suitable alternatives for future rounds. Further contractual changes, such as potential flexibilities for unconsented projects, remain under review.
Changes to the Non-Delivery Disincentive (“NDD”) would require regulatory amendments and cannot be implemented before AR7 opens this summer. The NDD, which penalises projects that fail to sign their CfD within 10 working days of award, remains in place for AR7. Terminating a CfD before the Milestone Delivery Date, for any reason, including mutual consent, constitutes non-delivery under current regulations.
Whilst the Consultation responses on this topic were mixed, the Government has moved forward with the reform in recognition of the urgent need to accelerate offshore wind deployment to meet 2030 and 2050 targets. By enabling earlier-stage projects to access the CfD scheme, the policy aims to bring forward more capacity and help de-risk development at an earlier stage, supporting a more robust and investable project pipeline.
Amending the budget publication process and information received
The Allocation Framework sets out how the Contract Budget Notice for each allocation round will be issued to NESO no later than 5 working days after the final application valuation is received, ensuring the budget is set before the auction phase commences.
The Contract Budget Notice will be published prior to NESO issuing the Notice of Auction and the opening of the sealed bid window. For FBOW projects, the Secretary of State may receive anonymised bid information from NESO after the submission of sealed bids but before the auction is held, to inform any potential budget increase, subject to Treasury approval.
AR7 will be split into the following two separate allocation rounds to allow offshore wind projects to progress more quickly through the process.
- “AR7” - FBOW and FLOW auction.
- “AR7a” - All other eligible technologies.
Applicants for AR7 may only submit a single sealed bid per application, whereas applicants AR7a may submit up to four flexible bids (i.e., multiple bids for the same project with different strike prices and/or capacities) per project.
Phased CfDs for FLOW projects
Previously available only to FBOW projects, the phasing mechanism now applies more broadly, with the definition of a “Phased Offshore Wind CFD Unit” expanded to include both FBOW and FLOW projects.
FLOW projects can now be delivered in phases, provided the total capacity does not exceed 1,500MW and the first phase accounts for at least 25% of that total. The first phase must commission by 31 March of the final Delivery Year, with the final phase no later than two years after. A single strike price will apply across all phases.
Applicants may submit flexible bids for later phases, so long as their commissioning dates and capacities do not exceed what was set out for the first phase in the original application. Each phase must fall within a one-year commissioning window, and the overall bid must remain within the project’s allocated budget.
Support for FLOW projects
The Government has confirmed its intention to support multiple test & demonstration scale FLOW projects in AR7, recognising the technology’s potential to enhance energy security, drive decarbonisation, and support supply chain development and workforce transition. The proposal was broadly welcomed in the Consultation, but most industry respondents called for additional, targeted measures to reflect the unique challenges facing the FLOW sector. Given its earlier stage of commercial maturity compared to fixed-bottom offshore wind, FLOW continues to encounter elevated costs, logistical complexity, and supply chain constraints.
In response, the Allocation Framework introduces several FLOW-specific parameters, including:
- a dedicated load factor of 43.1%;
- the ability to submit flexible bids;
- an Administrative Strike Price of £271/MWh (2024 prices) for Delivery Years 2028/29 and 2029/30; and
- separate treatment of load factor and reference price for valuation purposes.
The Allocation Framework also allows for the use of minima, maxima, and soft constraints, which may be applied to reserve capacity or budget for FLOW projects, subject to the final Contract Budget Notice. While these measures mark an important step forward, it remains to be seen whether they go far enough to address the sector’s concerns around risk and early-stage commercial viability.
Increasing the contract term for future CfD projects
The CfD contract term will be extended to 20 years for FLOW, FBOW, onshore wind, and solar projects. This extension is aimed at spreading capital costs more evenly over time, enhancing investor confidence, and reducing strike prices during the major infrastructure build-out expected in the 2030s. FLOW, though less mature, faces higher development and financing risks, which longer-term support helps to mitigate. For solar, despite its relative maturity, the increasing scale and complexity of large utility-scale projects mean that extended revenue certainty is key to unlocking investment and accelerating delivery. All four technologies face greater exposure to market volatility and merchant tail risk, and the longer term should help address these challenges.
Solar PV Target Commissioning Window
In response to strong stakeholder support, particularly from developers of larger (>5MW) solar projects, the Government has decided to go beyond the initial proposal of 6 months and increase the solar PV Target Commissioning Window from 3 months to 12 months. The Government also acknowledged suggestions for a third delivery year and will confirm delivery years before AR7 opens.
Eligibility of surrendered CfD capacity for AR7
The Government confirmed its intention to introduce a temporary restriction on CfD capacity surrendered through Permitted Reduction or Final Installed Capacity flexibilities from re-entering AR7, while it develops a longer term policy for Allocation Round 8. This restriction applies only to capacity awarded in Allocation Rounds 1 to 6.
Previously, these flexibilities allowed developers to reduce the capacity of an existing CfD project, for example, in response to delivery or cost challenges, and then rebid the “surrendered” capacity into a future allocation round at a potentially higher strike price, if market conditions had shifted. This practice was used in AR6 by some fixed-bottom offshore wind projects that had earlier contracts with strike prices that became unviable due to inflation and supply chain pressures. By rebidding under new, more favourable terms, developers could improve project viability, but this also risked inflating costs to consumers and crowding out new projects.
To enforce this, applicants will be required to provide documentary evidence and undergo additional eligibility checks to verify they are not attempting to rebid surrendered capacity.
This approach received strong support from respondents. The Government clarified the restriction does not remove the ability to use Permitted Reduction or Final Installed Capacity; developers may still reduce their project size if needed; however, they cannot bid the released capacity into AR7. NESO is responsible for checking each application against the eligibility criteria set out in Schedule 5 of the Allocation Framework. If there is credible evidence that an application may not meet these criteria, NESO must investigate further before confirming qualification.
Repowering of onshore wind
Repowering onshore wind projects must meet a 25-year operating life threshold, based on the original commissioning date, before CfD payments can begin. While some respondents called for a lower threshold, the Government has retained the 25-year requirement. Documentary evidence, including Renewable Obligation register data, will be accepted to confirm commissioning and decommissioning.
The Allocation Framework updates key definitions to distinguish between repowering and life extension, ensuring clear contractual separation between new CfD-supported facilities and decommissioned assets. A “Repowered CFD Unit” is now defined as a new facility established following full or partial decommissioning of an existing eligible generating station. Only onshore wind is currently eligible, and repowering must involve the removal of all major generating components excluding grid infrastructure. In contrast, life extension projects, which involve continued operation without substantial asset replacement, are not eligible for CfD support.
Changes relating to the implementation of Part 5 of the Energy Act 2023 (Establishment of NESO)
The Allocation Framework for AR7 reflects the establishment of NESO. These changes will update definitions, references to NESO’s operating licence, and related legislative language to align the STCs with NESO’s new legal and operational status.
Changes relating to Clean Industry Bonus payment suspensions
An amendment will be made to the CfD Private Network Agreement to clarify that CIB payments should not be suspended in cases where generators fail to comply with specific undertakings related to their status as Private Network Generators. These undertakings include the requirement to remain a Private Network Generator and the obligation not to supply electricity to an offshore installation, as specified in Conditions 30.1(K) and 30.1(L). This amendment is consistent with earlier policy decisions that CIB payments should only be suspended when there is a clear and direct connection between the reason for suspension and the CIB itself.
Commentary
The AR7 registration window is now open, with the application window expected to open on 7 August 2025. The changes discussed demonstrate a clear commitment to improving project pipeline visibility and strengthening investor confidence. These reforms align closely with the Government’s Clean Power 2030, which targets significant capacity builds , including scaling offshore wind to 43-50 GW, doubling onshore wind, and trebling solar PV by 2030. These changes also reflect the Government’s aim to balance ambitious decarbonisation targets with the need for market stability and the value for money for consumers. As noted in the REMA Summer Update, CfDs will remain the main mechanism to support investment in low-carbon generation while REMA options are developed.
See our related articles on:
- The Government’s October 2024 Response to the January 2024 Consultation;
- The February - March 2025 Consultation; and
- The Government’s response to legislative proposals set out in the February - March 2025 Consultation
[1] This follows the Government’s initial response to the consultation, published on 6 May, which addressed the proposed legislative amendments.
