Designed to accelerate the clean energy transition, the bonus scheme will help to address recent supply chain challenges that could otherwise hinder the deployment of offshore wind (OFW) and floating offshore wind (FOW). The UK government has long aimed to increase local supply chain content, but past methods have faced challenges. This new incentive-based approach is both innovative and promising.

The CIB will allow applicants to secure extra CfD revenue support (“a bonus”) if they choose make investments (above the minimum standard) in a more sustainable supply chain. The highest scoring projects will receive financial support in addition to their regular CfD payments. £27 million per GW of capacity is available through the CIB process, with potential funding of up to £200 million. £27m in a 1 GW project (equivalent to approximately £3 billion CAPEX budget) is reasonably small amount (around 1 %) but CfD rounds are extremely competitive, with projects being won by narrow margins, so every little helps.

The aim is to shorten the supply chain, while encouraging investment in deprived areas in the UK. Investment outside of the country is permitted, but only if the supplier adheres to official Science Based Targets for greenhouse gas emissions. In short, we want a greener, shorter supply chain which supports our offshore wind developments, speeds up the process of reaching our green energy targets and brings jobs to areas of the UK that need them.

So, developers have a whole new set of requirements to meet should they wish to achieve a CfD in the UK.

Yes, the supply chain topic is similar, but the parameters have changed, and the stakes have been raised.

CIBs will only be measured by tangible manufacturing and installation contracts, meaning that investment in skills development will no longer count. The requirement to invest in deprived areas is new, and while well intentioned, comes with risk. The issue of investment in ports is a major factor for all offshore wind projects, but particularly FOW, as there are only certain areas which can build out ports big enough to support floating structures. We may be faced with the choice of investing in ports which are suitable for wind developments but do not meet CIB requirements or starting from scratch and scouting out new locations. What does this mean for those developers who have already made commitments elsewhere? This could lead to substantial delays, delays we cannot afford. Plans are already in play, and investment is already going into ports, particularly if we look at the work of the Strategic Investment Model in Scotland, where developers have already been working alongside the government to allocate funds to appropriate ports. Luckily, it has been confirmed that investment through the SIM will count towards CIB.

The demands on developers to provide information and meet requirements are growing. In Scotland, offshore wind projects are already required to provide Supply Chain Development Statements – they cannot get a lease agreement without one. Will those demands align with the requests of the CIB or will projects have to reconsider their plans to date? Scottish projects may run the risk of facing multiple penalties should they not meet the SCDS commitments to Crown Estate Scotland or CIB commitments. This can go so far as being potentially barred from applying for a CfD if their pre-existing supply chain commitments do not meet the minimum CIB investment criteria. The CIBs may be implemented in time to avoid any major disruption, but it’s clear that projects will have to continue to jump through many hoops to keep everyone happy.

Furthermore, the recipients of the investment must be able to evidence having set or committed to a Science Based Target (SBT) by the first day the CIB application window is open. They must have committed, set, validated, and communicated (i.e., publicly published) their SBTs by the Milestone Delivery Date outlined in the CfD. This requirement for suppliers outside of the UK to meet Science Based Targets (SBTs) for greenhouse gas emissions will likely be bottleneck. Not all suppliers are registered with SBTs – including some ScotWind developers.

We must also think about the timeline of AR7. Asking projects to adhere to new criteria in such a tight timeline is not going to be easy. Any delay on the CfD will in turn delay Final Investment Decisions and will make reaching 2030 targets less likely. We must hope that this does not act as a deterrent for those seeking to apply for a CfD in AR7, particularly as we expect a high number of big hitters to apply in AR8. We’re still playing a game of catch up from AR5 – if we want to achieve our targets for offshore wind deployment and Net Zero, then delays are not an option.

At Xodus, we are preparing to support our clients to compile and submit their CIB applications and will be sharing more thoughts on the CIB on our LinkedIn next week.