Energy
Glossary
Terms used in energy tenders and auctions, in plain words, each with an example from a verified record.
- Administrative strike price
In Great Britain’s contract for difference allocation rounds, the highest strike price a project of a given technology can receive in a round; the auction can clear below it.
As defined in Great Britain · Related: Renewables
Example
In Allocation Round 7, successful applications receive the clearing strike price set in the auction, capped at the administrative strike price.
From Renewable energy auctions: the price formula decides what a winning bid is worth; source: DESNZ: Contracts for Difference Allocation Rounds 7 and 7a, Contract Allocation Framework
- Availability payment and utilisation payment
Two ways a balancing service can be paid: an availability payment for being ready during an agreed window, whether or not the provider is instructed to deliver, and a utilisation payment for the energy it delivers when instructed.
Used across markets · Related: Capacity and flexibility
Example
NESO’s Balancing Reserve pays an availability payment, at a single clearing price in GBP per MW per hour, to every contracted provider for being available in the service window, and a separate utilisation payment for energy delivered when instructed.
From How capacity markets pay: the price applies only to the share of a unit the market counts; source: National Energy System Operator (NESO): Balancing Reserve service page
- Bid bond
Security lodged with a bid, such as a bank guarantee, that the buyer can claim on grounds the tender sets: for example, if the bidder withdraws its bid while the bid is still valid or, once selected, fails to sign the agreements the tender requires or to provide the performance guarantee.
Used across markets · Related: Grid and T&D
Example
Each Vizag phase I bid carried a bid bond of Rs. 78.70 Crore, valid 30 days beyond the bid’s 180-day validity, which could be invoked, among other grounds, if the bidder withdrew or misrepresented its bid, or if as selected bidder it failed to sign, give the performance guarantee or buy the project company.
From Vizag’s green hydrogen transmission tender: the charge waits for all eight elements, the guarantee does not; source: RECPDCL (REC Power Development and Consultancy Limited): Single Stage Request for Proposal, Transmission system for proposed Green Hydrogen / Green Ammonia projects in Vizag area, Andhra Pradesh (Phase-I)
- Build-own-operate
A contract model in which the selected company builds the project, owns it and operates it for the term of the contract.
Used across markets · Related: Battery storage
Example
Both rounds are build-own-operate. The Kerala agreement runs for 12 years and the Odisha agreement for 15 years, each from the scheduled commissioning date or full commissioning, whichever is later.
From In SECI’s storage tenders, the subsidy needs its own guarantee too; source: Solar Energy Corporation of India (SECI): RfS for 125 MW / 500 MWh BESS in Kerala with VGF (ESS-3), RfS No. SECI/C&P/IPP/15/00018/24-25
- Call-off
A contract awarded under a framework agreement to one of the suppliers party to it, on the terms the framework sets, sometimes after a new competition among those suppliers.
Used across markets · Related: Grid and T&D
Example
The converter framework notice named Eastern Green Link 4 and Sealink as early projects whose call-off process, given their criticality and the need to realise them within the timeframe set by Ofgem’s Accelerated Strategic Transmission Investment framework, would run in parallel with the procurement of the framework agreement itself; interested suppliers would not have confirmation of a place on the framework before they had to take part in those call-off procurements, a place on the framework would be a condition for the award of any call-off contract, and that, its current expectations for the early projects notwithstanding, National Grid reserved its rights to use different procurement routes.
From How grid and transmission equipment is procured: the supplier field narrows before the project; source: Find a Tender: National Grid UK Limited, contract notice for the HVDC converter framework, 2023/S 000-035470
- Ceiling price
The highest price a tender or auction accepts from a bid.
Used across markets · Related: Hydrogen
Example
The European Hydrogen Bank’s second auction (IF24) offered EUR 1.2 billion, including EUR 200 million for projects with off-takers in the maritime sector; it was pay-as-bid, with a ceiling price of EUR 4 per kg.
From How hydrogen support auctions work: the guarantee comes before the money; source: European Commission: Innovation Fund, the second European Hydrogen Bank auction (IF24)
- Clearing price
The price at which the offers an auction accepts meet the volume it seeks. Under pay-as-clear, selected offers are paid this price rather than their own bids, subject to any cap the rules set.
Used across markets · Related: Battery storage, Capacity and flexibility, Renewables
Example
Great Britain’s T-4 auction for delivery year 2029/30 ran on and cleared at GBP 27.10 per kW per year.
From How battery storage is procured: what each scheme pays for, and what the winner gives up; source: DESNZ: Capacity Market Auction Monitor Report, 2025 T-4 auction, delivery year 2029/2030 (prepared by Deloitte)
- Contract for difference
A contract with an agreed strike price: when the market reference price is below the strike price, the generator is paid the difference; when it is above, the generator pays the difference back.
Used across markets · Related: Renewables
Example
Under a contract for difference, the generator is paid the difference between the strike price and a reference price for the market; when the market price exceeds the strike price, it pays back the difference.
From Renewable energy auctions: the price formula decides what a winning bid is worth; source: DESNZ: Contracts for Difference, collection page
- Defects liability period
The period after completion or acceptance during which the contractor must put right defects in the works it delivered.
Used across markets · Related: Grid and T&D
Example
Defects liability ran for 24 months from Operational Acceptance, and for 36 months for transformers, reactors, circuit breakers, disconnectors, instrument transformers, SAS and WAMPACs: Addendum No. 3 raised that extended period from 12 months after a bidder asked ZESCO to confirm 12.
From In Zambia’s Nakonde–Kasama tender, losses are priced into the bid and enforced at the factory test; source: ZESCO Limited: Package 4, Nakonde Stepdown and Kasama 330 kV substations (RFB ZM-ZESCO-495237-CW-RFB), Update 4 archive: Request for Bids REV05 of , Addendum No. 5 and its notice, Clarifications No. 2
- Derated capacity
A unit’s power multiplied by its derating factor: the capacity a capacity market counts, and usually the measure in which offers are made and paid. Belgium calls a unit’s derated capacity its eligible volume.
Used across markets · Related: Battery storage, Capacity and flexibility
Example
A Belgian unit’s eligible volume is its reference power multiplied by its derating factor.
From How capacity markets pay: the price applies only to the share of a unit the market counts; source: Elia: CRM Functioning Rules, version 6 ()
- Derating factor
The share of a unit’s power that a capacity market counts towards security of supply. It is set for each technology, often afresh for each auction, and for storage it usually depends on duration.
Used across markets · Related: Battery storage, Capacity and flexibility
Example
In Great Britain’s T-4 auction for delivery year 2029/30, the derating factor for battery storage was 43.96% at 4 hours of duration and 21.98% at 2 hours.
From How battery storage is procured: what each scheme pays for, and what the winner gives up; source: National Energy System Operator (NESO), EMR Delivery Body: Capacity Market Auction Guidelines, 2025 T-4 auction, delivery year 2029/2030, version 1.0
- Dynamic market
Under the UK’s Procurement Act, a list of suppliers that have met the market’s conditions for membership and are eligible to take part in future procurements. The Act replaces dynamic purchasing systems and qualification systems with this single tool.
As defined in the United Kingdom · Related: Grid and T&D
Example
The Cabinet Office’s guidance says the Procurement Act 2023 replaces dynamic purchasing systems and qualification systems with a single new tool, the dynamic market: a list of qualified suppliers who have met its conditions for membership and are eligible to participate in future procurements.
From Rail qualification systems: who can bid is settled before the tender; source: Cabinet Office: Guidance: Dynamic Markets (HTML), Procurement Act 2023 guidance, updated
- Earnest money deposit
In Indian public tenders, the bid security a bidder lodges with its bid, in one of the forms the tender allows, such as a bank guarantee.
As defined in India · Related: Battery storage
Example
In Kerala (SECI’s ESS-3 round), the earnest money deposit is INR 341,000 per MWh of quoted capacity. It can be a bank guarantee valid for 12 months from the last day for bids, a payment on order instrument from IREDA, PFC or REC, or an insurance surety bond.
From How battery storage is procured: what each scheme pays for, and what the winner gives up; source: Solar Energy Corporation of India (SECI): RfS for 125 MW / 500 MWh BESS in Kerala with VGF (ESS-3), RfS No. SECI/C&P/IPP/15/00018/24-25
- Framework agreement
An agreement with one or more suppliers that sets the terms, in particular on price, for contracts to be awarded during a given period.
Used across markets · Related: Grid and T&D
Example
Under the Utilities Contracts Regulations 2016, which still apply to a utility’s procurement begun before , a framework agreement sets the terms, in particular on price, for contracts to be awarded during a given period; those contracts are awarded on objective rules set out for the framework, which may include a new competition among the suppliers party to it.
From Transformer lead times: when suppliers are chosen at the framework, the delay risk comes with each order; source: The Utilities Contracts Regulations 2016 (SI 2016/274), regulation 51, as made, legislation.gov.uk
- Investment threshold
In a capacity auction that offers new capacity a longer contract, the minimum investment per unit of capacity a project must commit to for that longer contract.
Used across markets · Related: Battery storage, Capacity and flexibility
Example
In Italy, existing capacity takes a one-year contract; new capacity can take a 15-year contract if its investment is at least EUR 215,000 per MW.
From How battery storage is procured: what each scheme pays for, and what the winner gives up; source: Terna: Disciplina del sistema di remunerazione della disponibilità di capacità produttiva, as approved by ministerial decree of and amended on , adapted to the new dispatching code, in force from
- Lead time
The time from ordering a piece of equipment to its delivery.
Used across markets · Related: Grid and T&D
Example
An IEA survey of industry players in 2024 found that, as of , it takes two to three years to procure cables and up to four years to secure large power transformers; the report does not publish the number of respondents.
From How grid and transmission equipment is procured: the supplier field narrows before the project; source: International Energy Agency (IEA): Building the Future Transmission Grid
- Liquidated damages
A sum fixed in the contract, as an amount or a rate, that the contractor pays for a failure the contract names, such as late delivery or completion; for delay it is usually set per period of delay and often capped.
Used across markets · Related: Grid and T&D
Example
Under the Vizag phase I draft agreement, a provider missing an element’s or the project’s Scheduled COD, as extended, “shall pay to the Nodal Agency, a sum equivalent to 3.33% of Monthly Transmission Charges applicable for the Element of the Project … / Project, for each day of delay up to sixty (60) days of delay and beyond that time limit, at the rate of five percent (5%) of the Monthly Transmission Charges applicable to such Element / Project, as liquidated damages for such delay and not as penalty”.
From Vizag’s green hydrogen transmission tender: the charge waits for all eight elements, the guarantee does not; source: RECPDCL: Transmission Service Agreement, draft issued with the RFP, Transmission system for proposed Green Hydrogen / Green Ammonia projects in Vizag area, Andhra Pradesh (Phase-I)
- Local content requirement
A rule that a stated share of a project’s cost, equipment or work must come from the country where the project is built, often backed by an undertaking or evidence from the bidder.
Used across markets · Related: Battery storage
Example
Odisha’s Amendment-01 adds a minimum local content of 20% of the total project cost in BESS procurement, with an undertaking from each bidder.
From In SECI’s storage tenders, the subsidy needs its own guarantee too; source: Solar Energy Corporation of India (SECI): Amendment-01 to the Odisha BESS RfS, Ref. SECI/C&P/IPP/15/0015/25-26/Amendment-01
- Milestone requirement
A deadline in a contract by which a project must show stated progress, such as money spent or commitments met; if it is missed, the contract may be terminated.
Used across markets · Related: Renewables
Example
In the Allocation Round 7 generic contract, the generator must show, within 18 months of signing, that it has spent at least 10% of its total pre-commissioning costs or met its project commitments; if it does not, the contract counterparty may terminate the contract.
From Renewable energy auctions: the price formula decides what a winning bid is worth; source: DESNZ: Allocation Round 7, contract for difference agreement (generic)
- Net worth requirement
A minimum net worth, assets minus liabilities, that a bidder must have to qualify, sometimes set in proportion to the capacity it bids.
Used across markets · Related: Battery storage
Example
Kerala bidders need a net worth of at least INR 3.41 million per MWh of the capacity they quote.
From In SECI’s storage tenders, the subsidy needs its own guarantee too; source: Solar Energy Corporation of India (SECI): RfS for 125 MW / 500 MWh BESS in Kerala with VGF (ESS-3), RfS No. SECI/C&P/IPP/15/00018/24-25
- Pay-as-bid
A pricing rule in which each selected bid is paid its own bid price.
Used across markets · Related: Battery storage, Capacity and flexibility, Hydrogen, Renewables
Example
Belgium’s Y-4 auction for delivery period 2029-2030 was pay-as-bid: each selected bid was paid its own bid price. It selected 4,689.57 MW of derated capacity in 65 capacity market units, at a weighted average price of EUR 27,333.51 per MW per year.
From How battery storage is procured: what each scheme pays for, and what the winner gives up; source: Elia: CRM Functioning Rules, version 5 (), the rules for the 2025 auctions
- Pay-as-clear
A pricing rule in which selected offers are paid the price set by the last offer needed to meet the volume, rather than their own bids; some markets set it per zone or cap it.
Used across markets · Related: Battery storage, Capacity and flexibility
Example
Italy’s auction paid every selected offer the marginal premium, capped at the limit for new or existing capacity, rather than its own bid.
From How battery storage is procured: what each scheme pays for, and what the winner gives up; source: Terna: Disciplina del sistema di remunerazione della disponibilità di capacità produttiva, as approved by ministerial decree of and amended on , adapted to the new dispatching code, in force from
- Payback
In some capacity markets, money the holder of a capacity contract pays back when a market reference price rises above the contract’s strike price, on the conditions that market sets.
Used across markets · Related: Battery storage, Capacity and flexibility
Example
Belgium has a payback obligation, which applies when the reference price exceeds the strike price.
From How capacity markets pay: the price applies only to the share of a unit the market counts; source: Elia: CRM Functioning Rules, version 6 ()
- Performance bank guarantee
A bank guarantee that the winning bidder provides before it signs the contract, as security for its performance.
Used across markets · Related: Battery storage
Example
The winning Kerala bidder posts a performance bank guarantee of INR 852,500 per MWh of contracted capacity before signing the battery energy storage purchase agreement.
From In SECI’s storage tenders, the subsidy needs its own guarantee too; source: Solar Energy Corporation of India (SECI): RfS for 125 MW / 500 MWh BESS in Kerala with VGF (ESS-3), RfS No. SECI/C&P/IPP/15/00018/24-25
- Qualification system
A list a utility keeps of suppliers it has approved in advance against objective criteria it sets; the contracts it is used for are then competed only among suppliers on the list.
Used across markets · Related: Grid and T&D
Example
Under the EU utilities directive, a supplier admitted to a qualification system can be selected to compete for the contracts the system covers, which are awarded among the suppliers already qualified; a framework agreement instead sets the terms, in particular on price, for contracts to be awarded during its term.
From ERTMS procurement: separate streams, gated by approvals; source: EUR-Lex: Directive 2014/25/EU on procurement by entities in the water, energy, transport and postal services sectors, consolidated text of
- Renewable fuel of non-biological origin (RFNBO)
Under EU law, a liquid or gaseous fuel whose energy comes from renewable sources other than biomass, such as hydrogen made with renewable electricity.
As defined in the European Union · Related: Hydrogen
Example
Under the EU renewable energy directive, renewable fuels of non-biological origin are liquid and gaseous fuels whose energy comes from renewable sources other than biomass, and they count only with greenhouse gas emission savings of at least 70%.
From How hydrogen support auctions work: the guarantee comes before the money; source: EUR-Lex: Directive (EU) 2023/2413 amending the renewable energy directive
- Special purpose vehicle (SPV)
A company set up only to carry out one project. A tender may allow or require the winning bidder to sign the contract through one it sets up, and may require the bidder to keep a minimum shareholding in it for a set period, such as until commercial operation.
Used across markets · Related: Battery storage
Example
In Kerala, the agreement may be signed by a special purpose vehicle (SPV) the winning bidder sets up. Until commercial operation, a single company’s shareholding in that SPV, or a consortium’s combined shareholding, must not fall below 51%, unless a listed company sets up the project.
From In SECI’s storage tenders, the subsidy needs its own guarantee too; source: Solar Energy Corporation of India (SECI): RfS for 125 MW / 500 MWh BESS in Kerala with VGF (ESS-3), RfS No. SECI/C&P/IPP/15/00018/24-25
- Viability gap funding
In India, a public grant towards a project’s capital cost; for battery storage it has been capped per MWh of capacity and paid in stages.
As defined in India · Related: Battery storage
Example
Viability gap funding is capped at INR 2.7 million per MWh or 30% of capital cost, whichever is lower, in Kerala, and at INR 1.8 million per MWh in Odisha.
From In SECI’s storage tenders, the subsidy needs its own guarantee too; source: Solar Energy Corporation of India (SECI): RfS for 125 MW / 500 MWh BESS in Kerala with VGF (ESS-3), RfS No. SECI/C&P/IPP/15/00018/24-25