There are a number of requirements which a Generator needs to fulfil before payments for generation can flow. These include the following, please click through for further information:
Initial Conditions Precedent
The Initial Conditions Precedent is the first delivery milestone of the CFD. Generators are obliged to provide specified information after signing their CFD. The provision of this information is subject to timelines that are listed in the CFD (within 10 business days of the CFD Agreement Date). In order to discharge these conditions the Generator will need to provide LCCC with the following:
A legal opinion confirming the Generator’s capacity and authority to enter into the CFD;
A completed Know Your Customer (‘KYC’) form, along with relevant supporting information; and
A description of the Facility, along with a map or plan of the Facility, detailing the assets comprising the Facility.
A template for the legal opinion is provided here. This template should only be tailored to include details specific to the Generator. Please follow the link for an updated and editable example of a completed know your customer (KYC) form.
Generators will need to provide supporting information with the KYC form and should allow themselves sufficient time to gather this information. Further, the legal opinion must be provided by an external legal advisor. LCCC would therefore encourage Generators to engage with LCCC as early as possible in respect of the ICPs and to provide drafts of these documents in the first instance.
Guidance on the Facility Description can be found here. In the first Allocation Round LCCC issued a letter upon CFD Allocation to all Generators advising them of the key dates relevant to the contract production and ICP processes. An example of the letter issued in 2015 can be found here. A revised letter containing dates relevant to the next Allocation Round will be issued in the next Round – this key dates letter is provided by way of example only, in order to provide some insight into the contract production and ICP processes
Milestone Delivery Requirements
There are a number of mechanisms incorporated in the design of the CFD contract to ensure progression of the projects to achieve generation by the dates stated in the CFD contract. One of those mechanisms is the Milestone Requirement, which Generators are required to fulfil by the Milestone Delivery Date.
Generators must choose one of the two following routes to demonstrate that they have fulfilled the Milestone Requirement:
- the 10% spent route, which requires the Generator to demonstrate that they have in aggregate spent 10% or more of the Total Project Pre-Commissioning Costs on the Project; or,
- the Project Commitments route, which requires the Generator to fulfil the Project Commitments set out in the CfD contract.
The Generator must also submit a Milestone Requirement Notice to fulfil the requirements of the CFD contract, a version of which can be found here. The Milestone Requirement Notice must be accompanied by a Director’s Certificate.
Additional information on the Milestone Requirement can be found in the Milestone Requirement Guidance. There are a number of templates attached as Annexes to the Milestone Requirement Guidance which you are encouraged to use as appropriate to assist with the data submission process.
We recommend that Generators submit both the Milestone Requirement Notice and Directors’ Certificate to us in draft form for review prior to submitting the final signed versions.
Operational Conditions Precedent
The CfD contract sets out a number of Operational Conditions Precedent which need to be fulfilled before Generators can issue a Start Date Notice and start to receive payments under the CfD. The Operational Conditions Precedent are part of the Further Conditions Precedent and are set out in paragraph 2 of Part B of Schedule 1 and Clause 5.4 of the Agreement. Guidance on the Operational Conditions Precedent is available here and is also briefly outlined below.
A written confirmation from EMR Settlement Ltd (the CFD Settlement Services Provider) that the Generator can meet a number of requirements such that settlements can be performed. Generators can contact EMR Settlement Ltd at firstname.lastname@example.org or visit https://emrsettlement.co.uk/ for further information with regard to this confirmation.
Installed Capacity Estimate is referred to under the Operational Conditions Precedent and Longstop Date requirement within the CFD Standard Terms and Conditions.
To support Generators in meeting the requirements of the CFD, and also help future applicants determine an appropriate volume of capacity to apply for in an allocation round, LCCC has prepared Guidance on the Installed Capacity relevant requirements.
Metering Arrangements and Electrical Schematic
Evidence that the Generator is complying in full with the Metering Compliance Obligations. The Generator needs to demonstrate that the Facility Metering Equipment meets all applicable rules and standards in the Balancing and Settlement Code (BSC), that it accurately records the BM Unit Metered Volume separately from any other input and output electricity and that it will investigate any fault or issue with the equipment as required by us or under the BSC.
In addition, Low Carbon Contracts Company Ltd will require a date and time stamped copy of the electrical schematic diagram, certified as being correct and up to date, showing the locations of the Facility Metering Equipment associated with the Facility (including details of the type of BSC-approved metering and communications equipment installed in compliance with the Metering Compliance Obligation and any relevant Metering System Identifier (MSID)).
The Generator will also need to provide evidence that the Communications Equipment (as defined by the BSC) is satisfactorily installed, commissioned, configured, operational, maintained and tested and is fully compliant with the BSC.
Additional Operational Conditions Precedent apply for certain Generation Technologies, such as:
- delivery of valid CHPQA details, which applies to combined heat and power (CHP) facilities;
- agreement and documentation of FMS Procedures (Fuel Management and Sampling), which applies to advanced conversion technology, anaerobic digestion, dedicated biomass with CHP, biomass conversion, energy from waste, landfill gas and sewage gas technologies; and
- a copy of the Market Supply Agreement and at least 3 months’ notice of the intended Start Date, which applies for Embedded Generators.
FMS and Sustainability
Note that Fuel Measurement and Sampling (FMS) arrangements and Sustainability Criteria only apply if the Renewable Qualifying Multiplier (RQM) is expressed to apply to the CFD contract in the CfD Agreement. Details about what technologies the RQM applies to can be found in the Standard Terms notice issued by the Secretary of State prior to each allocation round. The Standard Terms Notice for the 2014 allocation round can be found on the site.
What is Fuel Measurement and Sampling?
Payments under the CFD contract are only for generation that can be considered to be low carbon. For fuelled generation there is a need to establish the proportion of the generation that does qualify for payment and the FMS procedures enables that.
Specifically measuring and sampling fuels enables a Generator to determine the following information for their Facility:
- the quantity of each of the fuels used in generating the Facility’s gross output in a month;
- the energy content of each fuel; and
- the fossil-derived contamination percentage by energy content of each fuel.
The information mentioned above is used to determine a Facility’s RQM forms part of the information that Generators are required to report to Low Carbon Contracts Company Ltd (“LCCC”) in relation to the sustainability of fuels. There is guidance on the monthly FMS and Sustainability reporting requirements here.
The first FMS requirement of the CFD contract is for the Generator to submit their FMS proposal. As part of this, the Generator will need to submit an FMS questionnaire to inform us about the details of the proposal, an example FMS questionnaire is available here. Generators should attach a completed FMS questionnaire with the FMS Proposals Notice. The FMS questionnaire should set out the procedures proposed to measure and sample their fuels, and any other relevant supporting information. Generators who expect to meet the FMS Exemption Criteria will still need to propose Full FMS Procedures as part of their FMS Proposals Notice. This is to account for any instances where the Generator does not meet the FMS Exemption Criteria.
The Sustainability Criteria and FMS Procedures
Each month Generators are required to report against the Land Criteria and Greenhouse Gas Emission Criteria (together known as the Sustainability Criteria) per consignment of fuel. As part of their FMS Procedures, Generators will need to consider whether they are using a single or multiple consignments of fuel, and whether these consignments are mixed. Where consignments are mixed, whether at the Facility or in the supply chain before arriving at the Facility, a Mass Balance System must be used.
Please note that Ofgem have been appointed to support and advise us on FMS arrangements and Sustainability Criteria. Ofgem will engage with you directly in relation to your FMS Procedures, FMS Report, SC Monthly Information and SC Annual Compliance Reports submission. Please also note LCCC, as the CFD Counterparty, remain the party to whom you should send (and from whom you will be sent) all notices under the CFD contract.
Start Date Notice
Before Generators can start to generate and receive payments under the CFD contract they must submit a Start Date Notice. The Start Date Notice should be accompanied by a Directors’ Certificate. There are a number of requirements set out in the CFD contract that must be met before a Generator can issue a Start Date Notice.
The Start Date Notice must be submitted to Low Carbon Contracts Company Ltd (“LCCC”) no later than 10 Business Days after LCCC have confirmed in a CP Response Notice (or Further CP Response Notice) that the Operational Conditions Precedent are fulfilled. Please note that as part of their Operational Conditions Precedent, Embedded Generators must have given LCCC at least 3 months’ notice of their intended Start Date.
The Start Date Notice should specify the date that the Generator proposes to be the Start Date for the purposes of the CFD contract. This date must be:
- no earlier than the date on which the Operational CP Notice relating to fulfilment of the final Operational Condition Precedent was given;
- no earlier than the first day of the Target Commissioning Window; and
- no later than the Longstop Date.
On the Start Date (unless the date of the Start Date Notice is the same as the Start Date) the Generator must provide a Directors’ Certificate certifying the same items as were required to be certified in the Directors’ Certificate which accompanied the Start Date Notice.