The UK Government introduced the Clean Industry Bonus (CIB) scheme for Contract for Difference (CfD) Allocation Round (AR) 7. The scheme offered a carrot and stick to ensure and encourage offshore wind developer investment that met certain criteria linked to local content, skills and environmental impact. The stick was a minimum standard investment value that developers must make to be eligible for the CfD. The carrot was higher CfD payments through ‘extra’ investments which go beyond the minimum standard.
At the moment, the impact of the scheme is unclear and will be until projects reach final investment decision. The Government clearly believes in the scheme, as it has continued its use in offshore wind into AR8 and has concluded that from AR9, onshore wind projects will also be eligible.
A key difference for onshore wind developers is that entering the CIB will be optional. Offshore wind developers must meet a minimum standard investment of £100 million/GW for fixed projects and £50 million/GW for floating projects. The minimum standard investment for onshore projects will be £25 million/GW but this is only a requirement if the developer is seeking additional CfD payments through extra investments.
The dilemma for onshore wind developers is whether to pursue a CIB application. The average onshore wind project size for AR7 was 33 MW. If this is repeated for AR9, on average the minimum standard for a project will be about £825,000 .
This is unlikely to be difficult to achieve. The decision to participate in the CIB scheme will come down to human resource and the potential to increase a project’s competitiveness. We have developed numerous CIB applications on behalf of developers. We have learnt that the CIB application window typically falls at a time when procurement is in its early stages and developers must analyse a wide range of potential suppliers for opportunities for qualifying CIBs. This requires time to develop a strategy and to engage with suppliers at a time when project teams are busy with engineering and procurement.
Participating in the CIB can take significant resource to prepare applications and subsequently monitor successful applications. However, the additional CfD payments can ultimately lead to a more competitive project with greater local content and/or reduced emissions. AR9 is likely to be fiercely competitive, and onshore wind developers may conclude that they can’t risk passing on the bidding advantage that CIBs offer.
