Characterised by some as a step back from net zero, others argue that a break to reassess how the Contracts for Difference scheme runs is needed.
November 5, 2026
A recent news report claimed that energy minister Michael Shanks had announced a pause in the UK government’s Contracts for Difference (CfD) scheme.
The Telegraph reported that, as part of a “climbdown” from net zero obligations, Shanks had told the House of Lords environment committee that the auction was being put on hold in order to reform the CfD programme.
Transcripts show that Shanks told Parliament’s Environment and Climate Change Committee that while Allocation Round 7 (AR7) and AR8 (the most recent CfD round) both “ran in broadly the same terms as previous auction rounds, we do now want to pause before AR9 and look at whether we need some more significant changes to the contracts for different scheme to make sure they work for the consumers of the country”.
He also stated the importance of the scheme and pointed out that it has been replicated elsewhere.
Although not initially an annual thing, allocation rounds for the CfD scheme have run every year since AR4. The most recent, AR8, has taken place along the longest timeline allowed by the Low Carbon Contracts Company (LCCC), which oversees the scheme, with results due in February 2027.
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In the Autumn Budget, Chancellor to the Exchequer John Healey said the government’s focus is on cheap energy, which it believes will primarily be unlocked by clean power.
But he also said that consumer cost will be the first consideration in future energy decisions, and the CfD does, in theory, cost consumers as the subsidy is renumerated through energy bills.
However, as trade body Solar Energy UK pointed out, solar farms have collectively paid back £26.3 million more to consumers through the CfD scheme than they have received in support over the past decade.
The way that the scheme works means that when the cost of power is higher than the contract price, generators pay back any additional revenue. This delivers savings alongside those accrued by moving away from gas-generated power.
While the pause, then, is not tied to the affordability issue, there are some prevailing problems with the UK energy system that may hamper the effectiveness of the CfD scheme as it currently stands.
Shanks’ comments suggest that grid infrastructure reinforcements, particularly to prevent curtailment in areas where high volumes of power are generated, will be necessary before progressing a scheme that has historically seen large amounts of capacity come online.
One of the benefits of the CfD scheme is the long term investment certainty that it has created, attracting developers to build in the UK.
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According to Angus Widdowson, head of generation at route-to-market service provider SmartestEnergy, the news of a pause before AR9 “will come as a blow to generators and puts the future of the energy transition into question”.
“We know success at auction doesn’t guarantee delivery, especially as a large share of the physical infrastructure needed to connect that generation doesn’t exist yet, but pausing AR9 isn’t a solution.”
He said what’s actually needed is continued investment in grid infrastructure and a longer-term visibility for the industry over what the future of the energy market looks like.
To give some idea of the scheme's importance for development, 60% of the solar capacity built in the UK over the last three years has received a CfD.
The attention generated by the Telegraph’s article saw many take to LinkedIn to share their thoughts. Much of the below is thus taken from the site.
Sam Hollister, head of UK market strategy at energy consultant LCP Delta, posted: “For developers, the immediate implication is that AR8 may be the last opportunity to secure a CfD for some time, with the next auction potentially looking quite different.
“That changes the opportunity cost of not winning, although does not make bidding below a financeable level any more sensible.”
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Dan Roberts, director of economic consultancy Frontier Economics, said on LinkedIn that although the pause “will probably not be welcomed by investors” it could “end up with a positive result” if it drives decisions on topics “which have been on the government’s desk for a while”.
“Shanks’s reported comments about more significant reform raise some familiar questions about how we procure renewable generation, and what we want the CfD to achieve,” he said.
The response from Adam Bell, partner at strategic advisory, economic research, and policy advocacy firm PF Global, was positive. He said: “Traditional CfDs were an excellent transitional instrument but heavily distort the market when used for the majority of generation.”
Like Hollister, he projected that this will make AR8 “intense”, further suggesting there’s a “reasonable chance” that the round procures fewer projects than expected because developers will prefer their chances in AR9.
In his Energetica Substack, global research director at Aurora Richard Howard notes that framing the pause around a net zero ‘climbdown’, as in the Telegraph “misses the more interesting story”.
He writes: “There are some perfectly legitimate questions underneath the government’s thinking. Britain shouldn’t procure renewable generation in all locations at all costs. We should prioritise projects that contribute to a low-cost, secure and decarbonised electricity system.”
Read more about:
Molly Green
Section Editor, Informa
Molly joined the team in 2024 and has led coverage on the UK sites. Now shifting to a more global view, Molly is interested in how legislation shapes market dynamics, covering the intersection of policy design, investment patterns, and energy transition pathways.
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