Contracts for Difference (Allocation) (Amendment) Regulations 2026

Lord Teverson Excerpts

Wednesday 10th June 2026 Grand Committee

These amendments received strong stakeholder support in a recent public consultation. There was broad stakeholder recognition that the changes will improve the experience of applicants during the assessment process, support more effective competition and help to secure better value for money for consumers. This approach reflects the department’s continued close engagement with industry in the development of the CfD scheme. By building on the foundations laid in AR7, these regulations will, I believe, help strengthen procedures, simplify the operation of the scheme and introduce provisions that drive progress towards the 2030 clean power target, while securing better value for money for bill payers. I therefore commend these regulations to the Committee and beg to move.

[Lord Teverson (LD)]

My Lords, it is a great pleasure to listen to the Minister. He is the one Minister who, I know, if we asked for a one-and-a-half-hour explanation, he would be able to do it without notes because of his deep knowledge. When I looked at the Explanatory Note, I saw that it said that these regulations concern arrangements for determining whether renewables projects qualify for contracts for difference. I want to address that theme about a specific area.

The Minister mentioned AR5. Of course, AR5 was pretty disastrous, generally, but there was a bright spot in it. It is an area where I have to congratulate the previous Government on a very wise decision in including geothermal energy for the first time. I was privileged, three months ago, to officially open the United Downs geothermal electricity station down in Cornwall, near where I am resident. I have been a proponent of geothermal for some time.

I have a question for the Minister in that area, about determining which renewables qualify for CfD rounds. Obviously, the great by-product of some of this technology is the critical mineral of lithium, which is really important to our future industrial success in this country. Do the Government envisage geothermal continuing to be one of the areas that is ring-fenced as a technology in future rounds?

My second question for the Minister goes back to his past when he was a Member of Parliament in Southampton, where geothermal energy was important for heating. Given the Government’s strong will to broaden the application of CfDs, geothermal in many ways is even more suited for district heating, beyond combined heat and power schemes, which can be CfD related. What is the Minister’s view as to whether the Government see geothermal heating being part of a future CfD round?

[Earl Russell (LD)]

My Lords, I thank the Minister for his introduction—clearly, this stuff is more complicated than eBay. I also thank my noble friend for raising important questions about geothermal that I hope the Minister will come to answer, but we support the inclusion and further development of that technology within our renewables energy mix.

These regulations are modest but worthwhile technical reforms to the contracts for difference scheme, and they have our support. As we know, auction rounds are the central part of our drive to clean energy, the energy transition 2030 and net zero by 2050. As the Explanatory Note sets out, competition has grown, so it is essential and welcome that, between rounds, the Government are undertaking these fundamental reviews of the way in which these complicated auction rounds work in practice. We welcome the fact that that has happened with stakeholders and that the Government are looking to improve and streamline these systems.

I turn to the reforms themselves, the first of which involves NESO reviewing the process for non-qualification decisions, as the Minister set out. Applicants will now be able to submit new evidence when requesting a review. We welcome this; it is overdue and is clearly a sensible reform. When an applicant has got so far in the process, it would be silly not to do that for the sake of one mistake on the form. As the Minister said, we know that many AR7 applications failed due to very minor omissions, so this is welcome. Allowing corrections at review stage will reduce unnecessary exclusion and improve fairness.

The second reform allows the delivery body to amend non-qualification decisions where the framework permits. This introduces much-needed flexibility into what was previously a perhaps overly rigid process and enables errors to be corrected without needing to process further to costly appeals.

Thirdly, Regulations 7 and 8 strengthen the treatment of pending applications. The definition is extended so that those still within appeal windows can submit sealed bids, while Regulation 8 ensures that those bids cannot be disclosed. This is an important safeguard for the integrity of the auction process. I will not ask the Minister to give us a two-hour explanation.

Taken together, these changes are administrative but meaningful and they will help make the process more streamlined and efficient. They reduce barriers, improve fairness and strengthen confidence in the system. As the Minister said, they come at a significant moment in our transition. As he pointed out, allocation round 7 was a landmark—the largest in European history, with 14.7 gigawatts across 201 projects and over £22 billion of investment, and the largest of our rounds to date. Of course, coming after the problems we had with a previous round, it was extremely welcome that it was successful.

I also welcome the fact that the Government have made the decision to bring AR8 forward to July 2026. That maintains momentum and sends a clear signal of the UK’s commitment to the clean power 2030 ambitions. That is, in turn, good for industry and for showing a clear path to investment in our renewable future.

I have a couple of questions generally, since we are here debating this. On contract length for CfDs, we welcome the fact that the Government have already extended the contracts from 15 to 20 years. The Minister will be aware that it is my party’s policy that we would like to see those CfDs extended further, to 25 years, with the asset lifetime stretching from 25 to 30 years. Are the Government open to and actively considering that? Is it on the agenda?

Obviously, the strike prices at the last auction were above those in previous rounds of auctions. There are several reasons for that, primarily global inflation pressures. There is a need in the next round to make sure that we set a competitive price, one that recognises that inflation is there, so I have a quick question for the Minister about the calculations that the Government are making for AR8, because obviously inflationary pressures are still there—in fact they are exaggerating a bit—while making sure that we get a successful auction at a good price.

It was in the press today, and I presume it is accurate, that the Government have now secured grid connections for half of the projects needed to get us to clean power 2030, so I am pleased to see that the grid reforms are having an impact and that we are making that progress. But we have a lot coming through the system, so I ask for reassurance from the Minister: a lot of projects are bunched together, so I want to be sure that a product of our own success is not that we create bottlenecks in the system.

In the last round, AR7, we actually secured only 1.3 gigawatts of onshore wind. I recognise that the Government have removed the effective planning restrictions that previously existed. To my mind, there is more to do. A bit like my noble friend who raised geothermal, I wanted to ask the Minister a quick question: what more can be done to further kick-start onshore wind and onshore wind investment? In particular, what is the Government’s thinking on AR8?

To conclude, these regulations are sensible and proportionate. The Government have clearly worked with stakeholders and have stakeholder support. We welcome the regulations and are pleased to see that really detailed reviews are happening between these essential and important auction processes.