The UK government has confirmed that hydropower projects with capacities between 5MW and 50MW will be eligible to compete in a new Pot 5 category under Contracts for Difference (CfD) Allocation Round 8 (AR8), marking a significant change to the country’s renewable energy support scheme.
The change forms part of the government’s AR8 framework and follows a consultation on refinements to future allocation rounds. The Contracts for Difference scheme is the UK’s primary mechanism for supporting low-carbon electricity generation through competitive auctions.
The British Hydropower Association (BHA) welcomed the decision, describing it as the result of several years of engagement with government. The association has argued that medium-scale hydropower should not compete directly with large-scale solar PV and onshore wind projects, but instead be assessed alongside technologies with similar characteristics.
According to the BHA, the creation of Pot 5 better recognises hydropower’s contribution to reliable winter generation, operational flexibility and long-term electricity system resilience.
The association also noted that hydropower enters the new category with an administrative strike price of £168/MWh, one of the lowest within Pot 5, which it believes strengthens the competitiveness of eligible projects compared with previous allocation rounds.
Attention will now turn to the publication of the Contract Budget Notice, which will set the funding available for Pot 5 and determine how many projects can secure CfD contracts in AR8. The government has indicated that Allocation Round 8 will open during July 2026 following publication of the required framework and statutory documents.
The BHA said the establishment of Pot 5 represents “a welcome step in the right direction” and said it would continue working with government to ensure the revised auction structure delivers meaningful opportunities for the UK’s hydropower sector.
