The UK Government has published the final set of reforms to the Contracts for Difference (CfD) scheme, ahead of Allocation Round 7 (AR7), with key changes designed to improve investment certainty, enhance delivery flexibility, and ensure better value for consumers.[1]
Longer Contract Terms
One of the most significant changes is the extension of CfD contract lengths from 15 to 20 years for fixed-bottom offshore wind, floating wind, onshore wind and solar. This change is expected to lower strike prices by spreading guaranteed returns over a longer period, and delay the point in which projects are exposed to volatile wholesale market prices after their CfD ends. The hope is that this increased revenue certainty will strengthen investor confidence and ease access to financing, helping deliver the uplift in renewable energy required to realise the 2030 clean power target.
Relaxing eligibility for fixed-bottom offshore wind
Fixed-bottom offshore wind projects will now be able to bid into the CfD mechanism prior to securing planning consent, providing certain conditions are met. Specifically, at least 12 months must have passed since either:
- The project’s consent application was accepted by the Planning Inspectorate (England/Wales), or
- The start of public consultation (Scotland).
Securing planning consent has been identified as a key factor in projects being delayed, with the process often taking upwards of two years. The hope is that the reforms will spur on increased capacity competing for contracts in AR7, with an expected 20GW of offshore wind capacity now expected to be eligible to bid in, meaning more competition towards delivering a lower strike price.
Budget Transparency
DESNZ has decided against its initial proposal, to set capacity ambitions for all technologies prior to the CfD auction round, and setting budgets after the bidding process had closed. Instead AR7s budget will be published before the sealed bid window opens, and AR7 specific capacity ambitions shelved.
The Government has split AR7 into two, with fixed-bottom and floating offshore wind bidding into ‘AR7’ and other technologies into AR7a. This change is to ensure offshore wind contracts can proceed independently, without delays from appeals or disputes in other sectors.
Additionally, the Secretary of State will be able to view price information for bids that exceed the AR7 budget (but not AR7a) to increase its budget if there are good value projects that would have just missed out.
Temporary removal of capacity surrendering
DESNZ has confirmed it will temporarily restrict the re-entry of surrendered CfD capacity from previous allocation rounds into AR7. Developers will still be allowed to reduce their project capacity under existing rules, but cannot re-bid that capacity in this round.
This measure aims to prevent gaming of the system, where generators might strategically surrender capacity to bid again at a higher strike price. The change is aimed at supporting responsible bidding, as well as providing delivery certainty for the supply chain. However, the Government acknowledges that it may limit flexibility for developers facing unforeseen commercial or technical challenges.
Greater Flexibility for Solar PV Deployment
In a move welcomed by solar developers, the Government will extend the target commissioning window for solar PV projects from three to 12 months. This will provide developers with more flexibility in navigating supply chain issues and grid connection delays, without incurring financial penalties or triggering contract amendments.
Repowering Onshore Wind Projects Now Eligible
The reforms also open the door for repowered onshore wind projects to compete for CfDs. This will allow older sites to be redeveloped with newer technology, extending their operational lives while leveraging existing grid connections and site infrastructure.
The change aligns with broader efforts to maximise the value of existing renewable assets and maintain momentum in the onshore wind sector.
What Happens Next?
Allocation Round 7 is expected to open for applications in August 2025, with the allocation framework and standard terms due to be published on 24 July. The application window for both AR7 and AR7a will run from 7 to 27 August.
With lower barriers to entry and new budget flexibility for the Secretary of State, this round signals a shift towards a more competitive auction environment.
However, timing remains tight. The delayed REMA decision has pushed back the AR7 timeline, with outcomes now expected in February 2026, leaving limited time before AR8 begins. In turn, this has left a short window to secure the capacity needed for the 2030 target, making an already challenging task even harder.
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Notes
[1] Department for Energy Security and Net Zero, ‘Government response to the policy proposals in the consultation on further reforms to the Contracts for Difference scheme for Allocation Round 7’, 15 July 2025, Link
