This week, the Department for Energy Security and Net Zero released its framework for the upcoming 7th Auction Round (AR7) of the Contracts for Difference (CfD) scheme.
This framework includes parameters such as the ‘administrative strike price’ (ASP), which are used by eligible developers to set bids during the auction. Unlike previous auction rounds, the government has chosen to set the budget after bids are disclosed, meaning that they can more easily control the capacity of projects awarded CfDs.
The administrative strike price set out by government is the maximum that any developer can bid in to receive a guaranteed price for a generated MWh sold on the wholesale market. Developers are incentivised to outbid each other and bid in at the lowest price they can generate for, and all successful bidders are awarded the price of the highest bid in the stack of successful bidders. This auction round, the ASP (in 2012 terms) is £81/MWh.