UK: Government addresses CfD efficiency improvements for AR8

Response on improved efficiency proposals

On 20 March 2026, the Department for Energy Security and Net Zero (“DESNZ”) published an initial response to its December 2025 consultation on proposed changes to the Contracts for Difference (“CfD”) scheme for allocation round 8 (“AR8”) and future allocation rounds. The response deals only with those proposals set out in Chapter 5 of the consultation: Changes to improve scheme efficiency – proposed legislative amendments. This chapter dealt with proposals to amend the Contracts for Difference (Allocation) Regulations 2014 (the “Allocation Regulations”) to allow the National Energy System Operator (“NESO”) to:

• reverse a successful pre-qualification decision if NESO considers it made an error and the project did not meet the criteria
• accept new evidence to address non-material errors and omissions at Tier 1 stage
• to revise the Pending Applications provisions.

In its response, DESNZ has confirmed that it is proceeding with its proposals and aims to bring forward secondary legislation to amend the Allocation Regulations prior to the opening of the AR8 application window. Further clarity on the details of the administrative arrangements will be set out in the AR8 Contract Allocation Framework, and DESNZ intends to work with NESO to provide guidance to support applicants.

A response in relation to the other proposals outlined in the December consultation will be published in due course.

DESNZ decisions confirmed

Reverse a successful Pre-Qualification Decision

The Allocation Regulations will be amended to enable NESO to issue new or amended non-qualification determinations. The circumstances in which NESO may issue such a notice will include: (i) cases where NESO communicated only some, but not all, of the grounds for disqualification in its original determination; and (ii) cases where an applicant was qualified in error. The new or amended determination must specify which eligibility criteria have not been met and give reasons for the decision. DESNZ recognises that it could be “somewhat inconvenient” for an applicant to be told that its project did not actually meet the pre-qualification criteria, but expects this to be a “very rare occurrence”. This creates a new window of uncertainty for applicants. The consultation suggests it might extend until the end of the period for NESO to issue its Tier 1 appeal decisions. If a successful pre-qualification is proactively reversed by NESO at that point, an applicant will still be able to issue a Tier 1 appeal. It appears to us that NESO wants the flexibility to look back at all prior approvals while it is reviewing Tier 1 appeals and align its decision making. The practical implications of this approach—particularly where an application has been said to have been incorrectly qualified—are not yet clear, with further details to be provided in the Contract Allocation Framework ahead of AR8.

The government also considered whether a general pause should be implemented for all applicants or limited to those impacted by new or amended determinations. After reviewing stakeholder feedback, it has been confirmed that a project-specific pause will be instituted to accommodate appeals.

The consultation confirms that if an applicant receives a negative pre-qualification decision it must still submit a Tier 1 appeal to NESO in the usual way.

Ability for applicants to submit new evidence for Tier 1 appeals

NESO is now able to review new documentary evidence intended to correct non-material errors or omissions during the Tier 1 appeal stage. This is a welcome change. Amendments to the Allocation Regulations will specify the categories of acceptable documentary evidence and information at this stage will be detailed within the Contract Allocation Framework. DESNZ has further clarified that any applications lacking the required substantive documentary evidence or information by the application deadline will remain disqualified. To ensure fairness and consistency, guidance will be issued regarding the implementation of this process. This brings the CfD Tier 1 process into alignment with the Capacity Market Tier 1 process.

Revising “Pending Applications”

The Government will amend the “Pending Applications” section of the Allocation Regulations to address identified delivery issues. This section addresses the interim measures NESO must apply if an applicant is appealing, and the court appeal mechanism itself. The amendments to regulations 49 -51 of the Allocation Regulations will:

• extend the categories of applicants who are considered to have a “pending” application to include those who have received a negative Ofgem Tier 2 decision and are within time to appeal to court and / or have appealed to court and are awaiting the court’s decision. This is an important amendment as the prior rules appeared to be unnecessarily restrictive in this area, potentially restricting the interim measures and ability to appeal to court
• remove the requirement for NESO not to become aware of pending bid contents, while confirming that the Secretary of State cannot direct their disclosure
• clarify the procedure where an applicant becomes qualifying after a proceed notice has been given but before CfD notifications are sent, requiring NESO to determine whether the pending application would have been successful had it participated in the allocation process.

Stakeholders queried how pending bids would interact with bid stack visibility. This will be addressed in the second government response to be published later this year.

Further reading on proposed changes to AR8 and future allocation rounds

UK: Consultation published on CfD allocation round 8 changes | Eversheds Sutherland