Home Web information Letter from the Secretary of State for International Trade to the Executive Vice-President of the European Commission (web version)

Letter from the Secretary of State for International Trade to the Executive Vice-President of the European Commission (web version)

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The Rt. Hon. Anne-Marie Trevelyan Deputy
Secretary of State for International Trade
International Trade Department
Old Admiralty Building
London
SW1A 2DY

Telephone: +44 (0) 20 7215 5000
Email: [email protected]
Website: www.gov.uk/dit

Executive Vice President, Valdis Dombrovskis
Berlaymont Building
Rue de la Loi / Wetstraat 200
1049 Brussels
Belgium

Sent by e-mail: [email protected]

July 1, 2022

Dear Executive Vice President Dombrovskis,

DS612 United Kingdom – Measures relating to the award of contracts for difference in the production of low carbon energy

I am writing to you regarding DS612 regarding the UK Contracts for Difference (CfD) scheme. This follows consultations held on 18 and 19 May 2022 in Geneva. The UK delegation was pleased to attend these consultations and provide further information on the CfD programme.

I have provided some clarifications below, without prejudice to the UK’s rights and obligations under the WTO Agreements.

The UK has a world-leading Net Zero program and we are committed to having a fully carbon-free electricity system in place by 2035. As you know, the CfD program is the UK government’s main mechanism to support new low-carbon electricity generation and is fundamental to achieving the UK’s ambitious commitment to reach Net Zero by 2050. Advancing low-carbon generation is key to reducing our dependence and exposure to volatile fossil fuel markets and have competitive, efficient and innovative supply chains to achieve this vitally important goal.

1. Allocation Round 4

In 2021, we made changes to the CfD Supply Chain Plan Policy for Allocation Round 4 to further align policy objectives with UK Net Zero targets. As part of these changes, the UK government has introduced question 1.1 in the ‘Green growth’ section of the supply chain questionnaire.

We intend to publish additional guidelines for generators that confirm how question 1.1 will be scored at the implementation stage.

Any data provided on anticipated UK content levels in response to question 1.1(i) will be used for information purposes only and will not be scored. Question 1.1(ii) will be scored regardless of the origin of the suppliers and regardless of the stated anticipated levels of UK content. Therefore, in the event that Generators indicate no or a low percentage of UK content, this will not affect the score received for Question 1.1, including the answer to Question 1.1(ii).

This additional guidance will further confirm to successful Allocation Round 4 generators that, when conducting the Implementation Assessment, BEIS is looking for evidence that, when narrowing down their supply chain choices, generators have carefully researched and understood the options available in the supplier market, and the extent to which the chosen suppliers, whether in the UK or other countries, contribute to increased capacity, capacity and efficiency of supply chains. Generators can choose their suppliers regardless of where the supplier is from the UK or other countries. It also clarifies that producers can make changes to their original sourcing strategy, as long as they continue to contribute to the objectives of the supply chain policy and as explained above.

We would also be happy to provide further clarification to successful producers on how supply chain plans will be monitored throughout the process and how implementation declaration requests will be assessed. This will make it clear that the percentage of UK content is irrelevant to how the fulfillment of the producer’s sourcing strategy commitments is monitored and assessed at the implementation stage.

In particular, the anticipated level any UK content generator may have provided in response to question 1.1(i) at the application stage is not considered a commitment and therefore will not be assessed when implementing the project. As a result, producers are not required to meet the percentage of UK content stated in the supply chain plan questionnaire to be awarded a statement of implementation. Producers will not be penalized solely for choosing non-UK suppliers if they originally considered using UK suppliers in their supply chain plan application, and vice-versa, and they do not have to provide reasons linked to the origin of the suppliers to justify their choice of a non-UK supplier rather than a UK supplier, or vice versa. These additional guidelines, as attached to this letter, were posted on July 1, 2022 and we will be writing to successful applicants to ensure they are aware that additional guidelines have been posted.

2. Round allowance 5

BEIS launched an initial consultation on changes to the Supply Chain Plan process for Allocation Round 5 in February 2022. On May 3, 2022, BEIS published its response to this consultation. This confirmed that for Allocation Round 5, CfD applicants for a plant with a generating capacity of 300 MW or more and all floating offshore wind plants, will be required to provide the delivery organization (National Grid ESO) a statement of approval of the supply chain plan. .

On May 3, BEIS also posted a new consultation on proposed changes to the Supply Chain Plan Questionnaire for Allocation Round 5 on the official UK government website, gov.uk.

During this consultation, we proposed changes to the questionnaire in terms of the supply chain, which aim to make the questionnaire clearer and simpler. He explains that any data provided on anticipated levels of UK content will be used for information purposes only (it will form part of the ‘key statistics’ section) and will not be rated.

Any data provided regarding the percentage of all UK content is also not relevant to how the achievement of Sourcing Strategy commitments is assessed at the monitoring and implementation stage. As a result, producers will have – as is the case under Allocation Round 4 – complete freedom to choose between UK and non-UK suppliers, without having to justify, as to the origin of the supplier, these choices or any subsequent modification.

The consultation closed on June 14 and we are currently analyzing the responses to the consultation and finalizing the changes to the questionnaire. All adopted changes will be implemented moving forward for Allocation Round 5, which is expected to open in March 2023.

3. Futures CfD Allocation Rounds

The UK Government confirms that data on the level of UK content under the CfD scheme referred to by the EU in its request for consultations, including under future CfD allocation cycles, will continue to be requested For information purposes only, in accordance with the UK’s WTO obligations.

Best wishes,

THE RIGHT HONORABLE ANNE-MARIE TREVELYAN MP

Secretary of State for International Trade and President of the Chamber of Commerce