1. CfD investor simulation
exercise
21 May 2013
DRAFT – This should not be taken to represent DECC Policy

2. Agenda for today
2
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Time Presentation Presenter
9:30-9:40am Welcome Jonathan Brearley (DECC)
9:40-10:10am Introduction and scope of session Chris Hemsley (DECC)
10:10-10:25am View from the renewable energy sector Gordon Edge (RUK)
10:25-10:30am Introduction to breakout sessions Ilesh Patel (Redpoint/Baringa)
10:30-10:45am Coffee break
10:45-12:40pm Breakout sessions by technology Facilitated by Baringa
12:40-13:10pm Feedback from breakout groups
13:10-13:20pm Final observations and next steps Chris Hemsley (DECC)

3. Introduction and scope of
session
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Chris Hemsley
CfD Design Team Lead, DECC

4. Introduction
4
• Aim of the session:
1. To gain a common understanding of the developer lifecycle for different low
carbon technologies, as well as the CfD lifecycle up to commissioning,
2. To seek views on the degree to which the CfD policy position logically
maps with the developer lifecycle for different low carbon technologies.
• Policy position:
 Largely reflects the November 2012 CfD Operational Framework and
Heads of Terms
 In some areas we have included additional detail or options for the
purposes of discussion – these do not represent firm policy positions
 We will take your views into account in the final policy design
DRAFT – This should not be taken to represent DECC Policy

5. Scope of this session
5
FOCUS FOR TODAY
The process for applying for and
obtaining a CfD through to
project commissioning
• We welcome views on all aspects of EMR, however today we would
like to focus on the developer journey to obtaining a CfD
NOT A FOCUS FOR TODAY
FID enabling
Level of CfD strike prices
Route to market
Counterparty and credit issues
Other provisions related to the
operational phase (e.g. change of
law, reference price source)
DRAFT – This should not be taken to represent DECC Policy

6. Key CfD issues to be covered in today’s
breakout sessions
6
Pre-
development
Development Financing
Construction
and
commissioning
• CfD strike price
visibility
• CfD allocation
budget
• Statement of how
much allocation
budget remains
• CfD payment start
date
• Target
Commissioning
Window (TCW) and
Long-Stop Date
• Force majeure
• Substantial financial
commitment (SFC)
• Contractual
obligations, and
consequences
• CfD eligibility
process
• Allocation
mechanisms
• Constrained
allocation process
DRAFT – This should not be taken to represent DECC Policy

7. Pre-development
7
Pre-
development
Development Financing
Construction
and
commissioning
In the Pre-Development phase, developers will be looking to explore the future opportunity for their
technology in the UK market, and to assess the likelihood of obtaining a CfD.
From a CfD perspective, we anticipate that developers will be most interested in:
• CfD strike price visibility for the anticipated year of commissioning
• CfD allocation budget, including any constraints on budget availability for their low carbon technology
• Statement of how much allocation budget remains in the anticipated commissioning year
DRAFT – This should not be taken to represent DECC Policy

8. 8
Pre-
development
Development Financing
Construction
and
commissioning
Development
In the Development phase, developers will be focused on key issues such as grid connection, planning
and consents, regulatory and licensing, commercial strategy and route to market.
From the perspective of obtaining a CfD, we anticipate that developers will be most interested in:
• The CfD eligibility criteria and process for applying for a CfD
• How CfDs are allocated and how the allocation mechanism may change as more LCF budget is used up
• The process for allocating CfDs when rationing is required to remain within the LCF
DRAFT – This should not be taken to represent DECC Policy

9. 9
Pre-
development
Development Financing
Construction
and
commissioning
Financing
In the Financing phase, developers will be looking to finalise all contracts and licenses to enable
financing to be completed and then for construction to commence.
From the perspective of obtaining and retaining the CfD, we anticipate that developers will be most
interested in:
• Definition of the ‘substantial financial commitment (SFC)’ CfD milestone
• The obligations relating to capacity delivered and the flexibilities/penalties attached to obligations
DRAFT – This should not be taken to represent DECC Policy

10. Construction and
Commissioning
10
Pre-
development
Development Financing
Construction
and
commissioning
In the Construction and Commissioning phase, developers will be focused on completing construction so
that the project can be commissioned on time in accordance with contractual obligations.
From a CfD perspective, we anticipate that developers will be most interested in:
• Requirements that need to be fulfilled for CfD payments to start (‘Conditions Precedent’)
• Target Commissioning Window (TCW) and Long-Stop Date (LSD), by technology
• Force majeure provisions and other exceptions that allow an extension of the LSD
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11. Capacity delivered – latest
policy thinking
11
• We are currently exploring the potential to allow a limited degree of flexibility on the
contract quantity
 Flexibility may be offered both at financial commitment milestone as well as at
commissioning (in addition to FM)
 Delivering below this range may lead to a proportionate reduction in the strike price (e.g.
0.5% reduction for each 1% under-delivery)
 There may be a backstop termination clause if the capacity falls below a certain threshold
(e.g. 85%)
• Today we would like to test this thinking as well as the prescribed thresholds
CfD
grant
Evidence
of SFC TCW Long-stop
date
CfD may be terminated if capacity
delivered is below a pre-defined
threshold (e.g. 85%).
Potential strike price reduction for
under-delivery (e.g. between 95 and
85% of adjusted capacity), s.t. FM
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Initial
Application:
100%
Obligation to deliver:
100-95% (of adjusted
capacity)
Can
Adjust:
100-95%
Delivered
capacity
(before strike
price reductions)

12. Introduction to the Breakout
Sessions
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Ilesh Patel
Redpoint/Baringa Partners

13. Breakout sessions
• Baringa will facilitate five breakout sessions to explore these issues further
• Breakout sessions are organised by technology:
 Biomass conversion
 Offshore wind (1000 MW)
 Onshore wind and solar (10-15 MW)
 Onshore wind (>50 MW)
 Marine, tidal stream (~20 MW)
• At the end of each section we have included some questions to guide
discussion, but these are by no means exhaustive
• Each group to feedback views at the end of the session
13

14. Final observations and next
steps
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Emily Bourne
EMR Programme Manager, DECC

15. Next steps
15
Date Milestone
July 2013 CfD contact terms published
July 2013 Draft delivery plan, including draft renewable CfD strike prices, published
for consultation
July 2013 Further detail on CfD allocation and price setting processes for CCS and
nuclear projects
October 2013
onwards
Government consultations on secondary legislation for EMR
By the end 2013 Energy Bill receives Royal Assent (subject to Parliamentary time/decisions)
By end of 2013 First delivery plan, including final renewable CfD strike prices published
(subject to Royal Assent)
2014 EMR delivery mechanisms up and running

16. Thank you
DRAFT – This should not be taken to represent DECC Policy