February saw the opening of the application window for the Clean Industry Bonus (CIB), a new part of the UK government’s Contracts for Difference (CfD) subsidy scheme, that’s designed to support fixed and floating offshore wind development. The window will close on 14 April.
According to Energy Secretary Ed Miliband, “This is our clean energy superpower mission in action, kickstarting growth, delivering energy security and transforming towns and cities as part of the transition – from the ports of Nigg and Leith to the manufacturing hubs of Blyth and Hull”.
So, what is the CIB? How will it work? And can it live up to the Energy Secretary’s ambitions?
The CIB (previously titled Sustainable Industry Reward) applies to all offshore wind projects bidding for funding through Allocation Round 7 of the CfD scheme and is governed by its own allocation framework. It has two components:
- a mandatory or minimum component (which sets a compliance ‘floor’ for all relevant CfD applicants); and
- an optional or extra component (which makes additional CfD revenues available on a competitive bid basis).
To participate in the CfD allocation round, all relevant CfD applicants must obtain what is known as a CIB statement. In order to obtain a CIB statement, each such applicant must meet a set of CIB minimum standards, demonstrating investment of at least £100 million per gigawatt (GW) (fixed) or £50 million (floating) in shorter supply chains (criterion 1 investment), and/or sustainable means of production (criterion 2 investment).
Criterion 1 investment may be made in manufacturing facilities or installation firms for a defined category of key components. They may also be made in ports, however, the ports in question must all be located in specified deprived UK areas.
Criterion 2 investment may be made in component manufacturing facilities or installation firms that have committed to a ‘Science Based Target’ set under the Science Based Target initiative.
Please note, in either criterion CIB investments can only be made in tangible assets (as opposed to intangible assets such as skills, and research and development) and must be made after 13 March 2024, but before the relevant CfD start date.
As well as obtaining a CIB statement, each relevant applicant is also entitled to submit a range of proposals under the CIB extra component to make additional criterion 1 or criterion 2 investments (on top of the minimum investment already committed to obtain the statement).
These proposals will be ranked by the value of the investment proposed, relative to its cost (in terms of the amount of subsidy sought). Top ranked bids will be allocated additional CfD revenue under the CIB budget, which was set indicatively in November 2024 at £27 million per GW of total capacity covered by CIB statements. Part of the budget will be ring-fenced for floating proposals.
According to Unite the Union, currently just 8% of UK wind turbines and equipment is produced domestically and the UK government’s target to increase this to 60% by 2030 would, in theory, create 35,000 jobs. However, in a reminder of the importance of viewing CfD investment support in a broader context, the CEO of RenewableUK pointed out, “Making the UK a clean energy superpower will never be achieved just by funding – clever policy design by government is needed to unblock the flow of private capital. This will require tackling some sacred cows such as the planning process and the approach to auction designs”.