The Clean Industry Bonus (CIB) award scheme operates within the Contracts for Difference (CfD) scheme as a means of allocating extra revenue support for offshore wind and floating offshore wind projects where generators have demonstrated they have invested in a more sustainable supply chain (the criteria being investment in shorter supply chains or investment in more sustainable means of production). The Department for Energy Security & Net Zero (DESNZ) has opened a consultation on proposed changes to the CIB scheme which predominantly include changes through a newly drafted Schedule 2 of the CfD Allocation Framework but also throughout the rest of the CfD Allocation Framework.    

Schedule 2

DESNZ proposes including a new Schedule 2 which, along with the other changes to the CfD Allocation Framework, is designed to allow the Low Carbon Contracts Company (LCCC), the counterparty to the CfD scheme, to deliver and enforce its CIB policy:

  • New obligations will be included requiring generators to comply with their CIB Statement. Failure to do so would now become a breach of contract.
  • Generators would be required to update the LCCC as to the status of their CIB Statement, their CIB Implementation Statement Application and where relevant their CIB Implementation statement or CIB refusal. This would be done as part of their Initial Conditions Precedent by providing a copy of their CIB Statement including confirmation of whether it has been revised or withdrawn. The latest status of the Statements must also be provided within 5 days of the Start Date.
  • The new schedule will have various obligations relating to the CIB minimum standard. If the generator has not delivered on the CIB minimum standard set out in their CIB Statement the generator will be liable to have Performance Related Adjustments applied by the LCCC. The methodology for applying the Performance Related Adjustments is also detailed. No Performance Related Adjustments will be made if the CfD contract has already been terminated and such adjustments will be indexed starting from the value of the minimum standard set out in the CIB Statement until final payments have been made. Similar proposals apply in respect of CIB Extra Investments.
  • Obligations have also been inserted to reflect the position under the CIB scheme in relation to CIB Implementations Statement, namely, that the Secretary of State's determination of the CIB Implementation Statement Application is conclusive whether that the CIB minimum standard has been met or not. Payments can also be recalculated and adjusted in the event the Secretary of State issues a new determination.
  • CIB Payments will be indexed using the year the CIB Statement was issued against the Consumer Price Index (CPI) under the existing CfD methodology. Performance Related Adjustments will be indexed against CPI as well with the base value being the minimum standard value set out in the original CIB Statement.
  • Default interest will be applied to delayed CIB Performance Related Adjustment Payments and CIB Payments but compensatory interest will not be included.

Other changes

Other proposed changes include for generators to supply LCCC their CIB Statement alongside a statement supported by a director's certificate setting out if it has been withdrawn or amended; amendments to the definition of Reconciliation Amounts to include CIB Payments or Performance Related Adjustments as appropriate; provisions for excluding suspension of CIB Payments in certain circumstances and provisions for exclusion of force majeure relief under the CIB scheme (given it is already covered under the CfD scheme).

Next steps

The response to the consultation is expected to be published in January 2025. If you have any questions around the CfD or CIB schemes, our team of Energy experts can help. Please contact James Stanier or Russell Evans for more information.