CfD AR8: DESNZ publishes draft Allocation Framework and consultation response

The Department for Energy Security & Net Zero (“DESNZ”) has published the draft Contract Allocation Framework for Contracts for Difference (“CfD”) Allocation Round 8 (“AR8”), together with its policy response to the legislative proposals in the December 2025 consultation on AR8 and future allocation rounds.

Taken together, the AR8 reforms are a further evolution of the Contracts for Difference towards a more actively managed, more granular allocation mechanism directed towards Government’s broader clean energy policy.

Key updates adopted in the draft AR8 Allocation Framework and policy response include:

• Tightened connections-related eligibility requirements, requiring Gate 2 (or Gate 1 with Connection Point and Capacity Reservation) status to participate in AR8.
• Permanent restriction on re-bidding surrendered CfD capacity. 
• Various technical adjustments to make it easier for applicants to fix minor technical and administrative errors, and generally improve scheme efficiency.
• New rights for DESNZ to set auction clearing prices.
• Updated valuation and sealed-bid rules.
• Extension of longstop period and reduction of minimum capacity threshold for floating offshore wind projects (“FLOW”).
• Strengthening the Unilateral Commercial Operations Notice (“UCON”) provisions. 
• Express recognition and enabling of hybrid metering arrangements.
• The introduction of a new offshore wind category for “other deepwater offshore wind”.

The key developments are discussed in more detail below. For more detail on AR8 please see our previous legal update on the broader policy context.

Ineligibility of Gate 1 projects

In line with its consultation position, the connections-related eligibility checks have been tightened to reflect the NESO connections reform process for AR8. Applicants at transmission and distribution levels must demonstrate that they have obtained, or it has been confirmed that they will obtain, either a Gate 2 Connection Agreement or a Gate 1 Connection Agreement with Connection Point and Capacity Reservation (“Gate 1 CPCR”). This is a deliberate alignment with the NESO connections reform queue, which prioritises projects that are aligned with the Clean Power 2030 strategic outcomes.

To evidence this, the applicant must produce either the relevant fully signed Connection Agreement or the full Gate 2 to Whole Queue Notification issued by NESO (or the relevant Distribution Network Operator) confirming the Connections Reform queue formation outcome. 

The framework also accommodates projects relying on a "Requested Advancement Date" from Phase 2 to Phase 1, where the applicant must provide an existing Connection Agreement, the G2tWQ Notification and a copy of their CMP435 Application form to evidence the advancement.

Exclusion of surrendered CfD capacity

The most significant continuity measure confirmed for AR8 is the permanent exclusion of capacity that has previously been surrendered under an earlier CfD.  This change converts what was a temporary AR7 measure into a settled feature of the regime.  The AR8 draft framework maintains this policy and extends it to capacity that was subject to a CfD Agreement signed pursuant to Allocation Rounds 1 to 7 and surrendered through the permitted reduction or final installed capacity adjustment mechanisms. 

The clear policy aims to prevent previously supported capacity from being ‘recycled’ into later rounds at potentially higher strike prices, while preserving the ability of existing CfD projects to use contractual capacity adjustment mechanisms. 

Better correction of errors and improvements to scheme efficiency

Alongside the substantive reforms, the policy response confirms a suite of technical legislative refinements to streamline bottlenecks seen in earlier allocation rounds.

The Allocation Regulations will be amended to allow NESO  to correct administrative errors during the assessment of applications and to issue a new or amended non-qualification determination, with a project-specific (rather than general) pause to accommodate any consequent Tier 1 appeal, and retention of the existing two-tier appeal mechanism. These administrative errors were seen to be one of the key causes of disputes for AR7, as commented on in our previous Legal Update: Ofgem AR7 Tier 2 Dispute Determinations: Key Trends 2025

NESO will also be empowered to consider new documentary evidence at the Tier 1 appeal stage to correct non-material errors or omissions in applications, provided that the evidence or information existed and was in the applicant's possession at the time of submission. 

The Pending Applications regime will be refined to capture applicants who have requested a Tier 2 appeal, those whose Ofgem appeal has been upheld but who remain within the court appeal timeframe, and those who have appealed to the relevant courts and whose appeal is undetermined. 

New rights for DESNZ to set auction clearing prices

The Allocation Framework includes new rules that allow DESNZ to apply separate clearing prices to technologies in CfD auctions without the need to apply specific limits to the monetary or capacity amounts of a particular technology awarded in the auction (called the “maxima”, in essence the “pots” used to establish a specific amount of capacity to be awarded, e.g. for onshore wind in AR7). DESNZ has explained separate clearing prices as a way of protecting against overcompensation for certain technology types which would have previously been subject to artificially high maxima. 

For AR8 (and onwards, as indicated in the policy response), DESNZ will be able to determine separate clearing prices on the basis of:

• Technology,
• Location (but only for offshore wind, based on the zone in which the project connects to the transmission or a distribution network),
• Repowering status, and
• Project capacity.

Valuation, Sealed Bids and anonymised bid information

• Perhaps the most procedurally significant change for AR8 is the extension of the sealed-bid and Anonymised Bid Information ("ABI") regime beyond fixed-bottom offshore wind to a broader group of established technologies. Under the draft AR8 Allocation Framework, the Technology Types subject to ABI are now Offshore Wind, Onshore Wind (>5MW), Remote Island Wind (>5MW) and Solar PV (>5MW); the remaining categories (including ACT, anaerobic digestion, dedicated biomass with CHP, energy from waste with CHP, FLOW, geothermal, hydro, landfill gas, ODOW, sewage gas, tidal stream and wave) are not subject to ABI.
• All AR8 applicants will be required to submit sealed bids within the relevant window (between 10 and 15 business days of formal notice of the AR8 auction), with any failure to do so leading to withdrawal of the application. 
• For sealed bids, the draft Allocation Framework distinguishes between applications subject to ABI, who may only submit one sealed bid (and may not submit flexible bids) and those that may submit flexible bids. 
• NESO may send anonymised bid information to the Secretary of State before the auction is held. The rationale is to allow DESNZ to review bid information before setting the final budget for the round, with a view to securing better value for money for consumers and avoiding under or over-procurement of certain technologies at inefficient prices.
• Sealed bids for phased fixed-bottom offshore wind projects must include a single strike price that applies to all phases, whereas phased FLOW projects retain the flexibility to specify different strike prices per phase, as with AR7.
• Extending the ABI regime from fixed-bottom offshore wind alone to onshore wind, solar PV and other large-scale technologies represents a meaningful change in the bid dynamics for those mature technologies.

Extension of Floating Offshore Wind Longstop Period and reduction of Minimum Capacity Threshold

DESNZ’s policy response signposts adjustments to the Non-Delivery Disincentive and operational milestones for FLOW projects, extending the longstop period applicable to FLOW projects to 24 months and reducing the minimum capacity threshold to 85%.

These changes recognise that FLOW projects, which combine novel floating foundation technology with complex marine logistics, are exposed to a wider range of construction and supply chain risks than fixed-bottom offshore wind. The longer longstop window and lower minimum capacity threshold are intended to reduce the risk of pre-commissioning termination and to give developers a more realistic envelope in which to deliver and commission their projects.  

Strengthening the Unilateral Commercial Operations Notice mechanism

In its December consultation, DESNZ identified the need to introduce measures in the CfD’s standard terms and conditions to enable LCCC to obtain near real-time metering information from distribution-connected generators, in order to properly fulfil the purpose of the UCON mechanism in preventing intentional delay of the CfD Start Date to avoid paying back revenues above the strike price. Transmission-connected generators are centrally metered through the BSC, and therefore it is more straightforward for LCCC to determine their operation through this metering data, to which it has access. 

The policy response indicates that DESNZ will proceed with the proposed measures by amending the standard terms and conditions for AR8, including:

• Allowing LCCC metering access from the date of meter installation (rather than the Start Date under the CfD);
• Allowing LCCC to issue a UCON in certain circumstances of non-compliance by a generator; and
• Applying default interest to reconciliation amounts owed to LCCC where metering information is not provided by generators.

Hybrid metering enabled

The draft AR8 Allocation Framework expressly contemplates the use of hybrid metering for the first time, which would allow co-located CfD-supported and merchant projects to share the same metering equipment.  

Where a CfD project intends to use hybrid metering, NESO must include confirmation of this in the CfD Notification, based on the confirmation provided by or on behalf of the applicant at application stage. The precise detail of how Generators will be allowed to implement hybrid metering will be set out in the Standard Terms and Conditions for AR8, and in LCCC guidance, both of which are signposted by DESNZ in their policy response. 

Enabling hybrid metering at the application stage is a practical, but commercially significant, development. It opens the door to co-located project configurations being supported under the CfD without the metering question forcing developers into less efficient electrical layouts.

New technology category for deepwater offshore wind (“ODOW”)

AR8 introduces a new technology category for offshore wind:  “other deepwater offshore wind” (“ODOW”). ODOW projects must meet a distinct set of foundation and water depth conditions, including being situated in offshore waters of at least 50 metres depth, with supporting planning consent and depth-chart evidence. The ODOW category sits alongside the existing FLOW definition and is treated as a separate Technology Type for the purpose of bid information and clearing rules.

ODOW brings a wider range of offshore wind technologies, including innovative foundation designs, within the scope of the CfD, as envisaged in the December consultation. These are typically projects that are being developed for deeper-water sites that do not fit neatly within the established fixed-bottom or floating definitions and therefore have greater capex and a more complex design. The creation of this new technology type provides a clearer route to market for projects that use innovative deepwater foundation designs, while preserving the integrity of the FLOW and fixed-bottom definitions with the CfD.

What AR8 signals for developers and investors

AR8 signals a further shift towards a more actively managed CfD regime to ensure alignment with overall policy objectives, with bid strategy, evidence preparation and delivery risk assessment likely to play an increasingly significant role for participants.

Mandatory sealed bids, wider use of ABI data and new powers to set more tailored clearing prices give DESNZ greater scope to shape outcomes in future allocation round. At the same time, tighter connections-based eligibility rules, a stronger UCON regime and the permanent ban on rebidding surrendered capacity show that DESNZ wants to place more emphasis on certainty and deliverability within the scheme.

AR8 next steps

The indicative timeline for AR8 is now live, setting out when DESNZ, LCCC and NESO expect to take the relevant steps, accounting for the different scenarios relating to appeals. We have set out below an abridged version showing the earliest timeline scenarios for certain key milestones. 

• 6 July 2026 – publication of statutory notices, including the Application Window Notice, Pot and Price Notice, Standard Terms Notice, and Contract Framework Notice
• 6 July 2026 – final AR8 Contract Allocation Framework published
• 6 July 2026 – final AR8 Standard Terms published
• 20 July 2026 – 7 August 2026 – application window
• 10 August 2026 – 16 September 2026 – qualification assessment window
• 16 September 2026 – Applicants notified of qualification assessment
• 17 September 2026 – DESNZ publishes Contract Budget Notice and issues Notice of Auction
• 1 October 2026 – 7 October 2026 – Sealed Bid window
• 27 November 2026 – 1 December 2026 – NESO notifies applicants of auction results
• 2 December 2026 – 15 December 2026 – LCCC sends contracts to successful Applicants
• 16 December 2026 – 31 December 2026 – Applicants sign and return contracts (within 10 working days of offer)