11. In order for payments to be made under the CfD, the Government is minded that plant will first have to pass the Commissioning Acceptance Tests stipulated in the issued CfD. For the purpose of the CfD, these tests include:
for all plants which are subject to the Grid Code regulations7 (the current threshold is around 10MW), completion of Commissioning Acceptance Tests required under the Grid Code;
completion of the Commissioning Acceptance Tests set out by the relevant Distribution Network Operator for plants which fall below the Grid Code threshold; and
(possibly) any further tests that may be required to establish that the plant meets the specifications for which the CfD was awarded as set out by the System Operator in the allocation rounds or through the FID Enabling process or CCS competition.
12. The first two requirements above reflect the tests that any plant in the system must pass in order to be allowed to deliver power to the transmission network or, for embedded generation, the relevant distribution network. These tests are primarily concerned with ensuring operationally safe dispatch and the system’s ability to absorb faults.
13. The Government is minded that, for some technologies, additional tests are likely to be required, for example to verify that the sustainability and carbon content of the fuel used by a biomass plant is in accordance with the basis on which the developer was awarded the CfD, or that the carbon dioxide captured by a CCS-equipped plant has been or will be permanently stored.
14. In relation to early stage CCS projects, the Government is also mindful of the need to ensure that the arrangements for Commissioning Acceptance Tests and any associated penalties take account of, and are appropriate given the additional period of testing expected to be required for CCS-equipped plants (see
‘Administrative price setting for early stage CCS projects’ section above).
7 http://www.nationalgrid.com/uk/Electricity/Codes/gridcode/
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D. CFD TERMS – POST COMMISSIONING
This section sets out the Government’s emerging proposals on those CfD terms that apply to the post-commissioning phase. These terms will define a number of arrangements required to ensure that the CfD functions effectively, including:
how CfD payments are calculated;
how often CfD payments are made;
how long the CfD endures; and
how terms may be adjusted over time.
To provide as much clarity as possible on these emerging proposals, where appropriate, this section provides a technical translation of the policy to give a greater indication of what the actual CfD terms might look like in practice.
Table 6: Terms covered in this section (and the following section on Settlement)
Term Description Emerging Proposal
Reference Price
The market price for electricity that is referenced in the CfD for the purpose of calculating CfD
CfD Volume The definition of the volume of electricity for the purpose of is negative, in which case to pay on a measure of availability.
Settlement Process and timing for invoicing and administering CfD
34 CfD Length The length of the CfD from the
payment start date as defined
Minded not to link the CfD strike price to fuel costs for biomass.
35 Change in Law Arrangements for adjusting the
CfD in response to relevant technologies. This provides a stable basis for investment and makes it easier to compare costs of different technologies. It is consistent with the Government’s long term plan to deliver least cost decarbonisation by providing a framework in which technologies compete for CfDs. Notwithstanding this, the EMR White Paper set out the intention to develop different CfDs for intermittent and baseload plant given their different characteristics. Government’s view is that the CfD can be applied to all types of low-carbon generation, regardless of whether certain technologies – such as tidal power – may not fit neatly within the definitions of
‘intermittent’ or ‘baseload’.
2. In the short term, moreover, there may need to be provision for some variation in CfDs for certain technologies – within intermittent and baseload classes – in recognition of their different risk profiles (for example early stage CCS projects, due to their demonstration status), to ensure that they come forward at a reasonable cost. That said, risk should remain with the party best placed to take it, and it must be clear that any variations offer value for money and are consistent with securing state aid clearance.
3. The proposals outlined below are still being refined, and different aspects of the proposed design are at different stages of development. The Government will continue to engage with Ofgem, industry and other stakeholders in order to further develop these proposals prior to issuing a final CfD Operational Framework in the autumn.
4. Unless otherwise indicated, the text below applies to both the intermittent and the baseload CfD. In many cases, the text also applies exclusively to the GB Market.
The Government continues to discuss the development of the CfD with the Northern Ireland Executive in respect of participants in the Single Electricity Market, with a view to extending the proposed arrangements to Northern Ireland.
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