The United Kingdom government is poised to implement significant reforms to its Contracts for Difference (CfD) scheme ahead of Allocation Round 7 (AR7), slated to open in August 2025 with results anticipated by early 2026. These proposed changes aim to maximize renewable energy deployment, particularly for offshore wind, and accelerate progress towards the nation's ambitious 2030 clean energy targets, following lessons learned from previous allocation rounds, including the undersubscribed AR6.

Historically, the CfD scheme has prioritized projects with full planning consent. However, recognizing the decade-plus lead times for fixed-bottom offshore wind projects, the government proposes to relax these eligibility criteria, allowing projects yet to secure full planning permission to participate in AR7. To mitigate the inherent risks, unconsented projects would be required to demonstrate substantial progress in the planning process by a specified cut-off date, with two intermediate threshold dates currently under consideration for evidence submission.

To accommodate unconsented projects without creating a disparate two-tier system, amendments to the CfD Standard Terms and Conditions are being explored. These include introducing more flexible milestone dates and longstop dates for planning-related conditions, acknowledging that unconsented projects cannot commit to firm timings. Additionally, the government is considering provisions for early termination of CfDs if planning consent is not secured by a specified longstop date, ensuring accountability while providing necessary flexibility.

In a move to enhance deployment efficiency and address underspent budgets observed in AR6, the government confirmed its intent to grant the Secretary of State greater visibility of sealed bid information. This increased transparency is expected to inform more strategic budget-setting for future allocation rounds, signaling a stronger emphasis on capacity procurement rather than solely cost-driven decisions. This shift could lead to more stable and predictable market conditions for developers and investors.

While the government emphasizes that these consultations do not pre-empt final policy decisions, the proposed reforms, viewed in conjunction with ongoing planning reforms under the Planning and Infrastructure Bill, indicate a clear strategic pivot. The Bill, currently under parliamentary consideration, seeks to streamline the nationally significant infrastructure projects regime. This holistic approach suggests a future landscape characterized by a more agile, coordinated, and proactive strategy for delivering critical clean energy infrastructure across the UK.