UK to Extend CfD Contracts to 20 Years in Upcoming Renewable Energy Auction

The UK government will extend the Contract for Difference (CfD) term from 15 to 20 years starting with the seventh allocation round (AR7), set to open for applications in August 2025. The move aims to provide greater certainty for investors and developers amid evolving market dynamics.

The change will apply to a range of technologies, including solar PV, onshore wind, fixed-bottom offshore wind, and floating offshore wind. In addition to the extended contract duration, the government will also lengthen the Target Commissioning Window (TCW) for solar PV projects to 12 months, up from the current three-month requirement.

Under the current rules, solar developers must propose a three-month TCW aligned with one of the delivery years defined by the CfD allocation. However, in anticipation of larger-capacity solar developments, the government initially proposed expanding the TCW to six months. Following feedback from industry stakeholders—who cited supply chain constraints, construction delays, and commercial risks—the window was ultimately extended to 12 months to offer greater flexibility.

The decision to increase the CfD contract length follows an extensive industry consultation, with most respondents highlighting the market price volatility risks associated with the 15-year model. Stakeholders pointed to longer project lifespans, accelerated renewable deployment, and the growing incidence of negative market prices as reasons to adopt a more stable, long-term approach.

Further updates in AR7 include:

• Introduction of specific budget and auction parameters to support multiple test and demonstration-scale floating wind projects.

• A temporary restriction preventing previously surrendered CfD capacity from being resubmitted in AR7.

• Contractual updates concerning Clean Industry Bonus payments.

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AR7 carries significant weight as the UK pursues its 2030 target of 95% clean electricity generation for Great Britain. As part of this commitment, the government plans to increase solar PV capacity from approximately 19 GW (as of May 2025) to at least 45 GW by the end of the decade.

Marc Hedin, Head of Research for UK and Ireland at Aurora Energy Research, previously commented that AR7 will be crucial: “I think there will be a lot of budget in the upcoming allocation round, especially for solar.”

The upcoming round is expected to be a pivotal moment in advancing the UK’s long-term clean energy ambitions.