CfD clause amendment will enable solar and storage co-location for the first time

For the first time, it will be possible to include co-located storage within Contract for Difference (CfD) contract, the Low Carbon Contracts Company (LCCC) have unveiled.

Speaking at a webinar hosted by Solar Media and Sponsored by the LCCC today (28 October), the LCCC’s head of strategy, stakeholders and business development Gordon Edge and head of scheme management Nick Blair detailed the welcome amendment to the upcoming auction round four (AR4) set for the 13 December.

Previously, CfD contracts specifically prohibited the import of grid energy to co-located storage, unless it was covered under a separate balancing mechanism unit (BMU).

The intention of this policy was to ensure CfD payments were made for grid imported power, with storage just used to export it back into the system, Blair explained as part of Getting up to speed on CfDs: a discussion on solar power and the coming auction webinar.

As Blair mentioned, the LCCC have previously had feedback showing that this clause is a prohibitor to onsite storage, particularly as it is difficult and cost probative to set up a separate BMU, especially given the challenging business case for storage.

Through the LCCC’s engagement with generators and BEIS, the benefits of co-located solar and storage were made evident, in particular given the growing number of negative price periods. Thanks to the new amendment, storage will be able to be co-located on CfD sites on a bilateral basis. 

However, if a generator wishes to disregard the original clause, they must meet a number of criteria. They must be able to show that only electricity generated by the generating unit would be metered for CfD settlement, and that such metering will ensure the settlement happens at the time of generation.

Finally, generators must confirm that under no circumstance would the generator receive CfD payments for energy exported from their storage facility.

“We haven’t been too prescriptive over a what this [amended contract will] look like,” said Blair, “but what I would say is that we have metering experts who are contracted to us, EMRS, and we will be looking to them to really assist us with those.

“This will be about having a dialogue, about opening the door with us, and asking those questions.”

There is some precedent for this, with the LCCC previously having worked on private network metering, which they will be able to learn lessons on the most effective metering from. 

The full guidance around this amendment should be published in the next few weeks, but has now been agreed and signed off.

It looks set to be a welcome change, with Solar Energy UK’s head of policy Cam Witten commenting in the Q&A segment of the webinar – which was chaired by the association's CEO Chris Hewett – that concern around the impact of negative pricing on the solar assets had been a driver for interest in co-location.

“So the fact that now with those tweaks, you can disregard the prohibition of co-location if you can demonstrate the appropriate metering arrangements, I think that’s a really welcome change,” he continued. “I imagine that we’re going to see a lot more projects seriously considering storage additionality as part of their proposals.”

To find out more about the upcoming CfD auction, watch Getting up to speed on CfDs: a discussion on solar power and the coming auction here.