Draft Contracts for Difference (Miscellaneous Amendments) (No. 3) Regulations 2025

Dan Carden Excerpts

Monday 30th June 2025 General Committees

[The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Kerry McCarthy)]

I beg to move,

That the Committee has considered the draft Contracts for Difference (Miscellaneous Amendments) (No.3) Regulations 2025.

The regulations were laid before the House on 2 June this year. At the Global Offshore Wind conference this month, the Secretary of State for Energy Security and Net Zero reaffirmed our commitment to strengthening our energy security through the development of home-grown, low carbon power, while delivering a fair price for consumers. That is the best way to bolster our energy security, getting us off the rollercoaster of global fossil fuel markets. It is the best way to spark economic growth across the country, with hundreds of thousands of new jobs, particularly in our industrial heartlands, and it is the best way to tackle the climate crisis for today and future generations. That is why the Government are on a mission to make Britain a clean energy superpower, with clean power by 2030. The regulations will clearly contribute to that mission.

The contracts for difference scheme is the Government’s main mechanism for supporting new low carbon electricity generation projects in Great Britain. CfDs are awarded through annual competitive auctions, with the lowest price bids being successful. The sixth CfD allocation round—AR6, which ran last year—was the largest ever. It awarded contracts to 127 clean energy projects across Great Britain, capturing 7.2 GW of renewable capacity. However, we must ensure the continued success of the CfD. We must continually evolve the scheme to drive progress towards that 2030 clean power target, ensuring that it reflects the global challenges and opportunities faced by the renewables sector while delivering fair prices for consumers.

Building on our commitments in the clean power action plan, we plan to update the scheme, using the regulations, to continue our march towards a low carbon power system. First, the Secretary of State will be allowed to see anonymised bid information submitted to the National Energy System Operator for the allocation round before finalising the budget. In allocation round 6, there was unspent budget for fixed-bottom offshore wind, meaning that an opportunity was lost to potentially secure additional projects at a good price. Without addressing that issue, we risk not being able to take advantage of good value capacity deployment for Clean Power 2030.

Bringing forward renewable capacity at a reasonable cost will benefit consumers by moving the country away from volatile fossil fuel prices. A further amendment involves changing the budget publication process. As I mentioned, ensuring that we avoid budget underspend while continuing to protect consumers is crucial. Changing the budget publication process would allow the Secretary of State to set a budget based on anonymised bid information. That means that the Government can be certain that any capacity procured will advance our Clean Power 2030 ambition and be at a fair price for consumers.

To implement that policy change, we need to amend existing regulations to allow budgets for a CfD round to be published later in the allocation round process. We are also amending regulations to ensure that the costs of the clean industry bonus, referred to as the “sustainable industry reward”, are included in the Ofgem price cap. The first round of the clean industry bonus was run this year, applying to fixed and floating offshore wind, and it was a huge success. We have more than doubled the budget from £200 million to £544 million, leveraging up to £9 billion in investment into UK supply chains depending on AR7 results. That is an unprecedented amount of investment for our offshore wind industry. Never before in an allocation round has so much investment been earmarked for UK factories and ports, all in the poorest parts of our country.

The clean industry bonus sits within the CfD and is funded by the same levy on consumer costs. There needs to be specific provision in the relevant regulations that makes sure that the CIB is to be counted as a specific bill cost, as part of wider CfD costs. That is a technical change; all the rest of the CIB regulations are already in place. It will ensure that the price cap captures all the relevant factors that might affect it. The bill impact for CIBs is low: this year’s CIB round will cost consumers less than £1.50 a year for four years. What we get in return is a historic investment in our offshore wind industry.

To conclude, the consultation on these policy interventions sought views and supporting evidence on specific changes proposed for allocation round 7. We received a range of responses from across the industry, including developers, electricity traders and suppliers, as well as businesses operating in the offshore wind sector and consumer and environmental groups with an interest in the electricity sector.

Most respondents agreed with changing the budget publication process, improving the information available to the Secretary of State when setting budgets, and ensuring that CIB payments are included in the energy price cap. Respondents also provided input on how the Department should implement those policies. The Department continues to engage closely with industry on the development of the CfD.

[Dan Carden (Liverpool Walton) (Lab)]

The Minister mentioned UK manufacturing. I think it is really important that, as we seek to get towards a clean energy target and with these auctions going forward, the Government do far more to ensure that the production of wind turbines, for instance, is not just done abroad and imported, but involves UK manufacturing, providing decent, well-paid jobs up and down the country.

[Kerry McCarthy]

I could not agree more, and that is what the clean industry bonus is: it is designed to help foster those jobs through the manufacturing and supply chain. I am going up to my hon. Friend’s part of the world on Wednesday to see all that is happening in the bay when it comes to developing the energy resources of the Mersey. I am very much looking forward to that.

This instrument is another important step towards delivering clean power, shielding families from volatile gas prices and establishing the UK as a clean energy superpower. It builds on the existing success of the CfD scheme, evolving it to better reflect global market realities and to drive progress towards the 2030 clean power target, while protecting consumer bills.