Policy paper

Contract for Difference

Updated 13 March 2017

1. Introduction

A Contract for Difference (CFD) is a private law contract between a low carbon electricity generator and the Low Carbon Contracts Company (LCCC), a government-owned company, introduced as part of the now implemented Electricity Market Reform (EMR) programme A generator party to a CFD is paid the difference between the ‘strike price’ – a price for electricity reflecting the cost of investing in a particular low carbon technology – and the ‘reference price’– a measure of the average market price for electricity in the GB market. It gives greater certainty and stability of revenues to electricity generators by reducing their exposure to volatile wholesale prices, whilst protecting consumers from paying for higher support costs when electricity prices are high.

On this page you can access documents published by the Department of Business, Energy and Industrial Strategy ( BEIS) in the development of CFD policy and the CFD websites of our delivery partners the Low Carbon Contracts Company and National Grid and details of arrangements for the Offtaker of Last Resort.

2. Low Carbon Contracts Company

The Low Carbon Contracts Company is a private company, owned by BEIS. Low Carbon Contracts manages the new Contracts for Difference (CFD) introduced by Government as part of the ambitious EMR programme.

3. EMR Delivery Body

National Grid has been appointed as the Delivery Body for Contracts for Difference, responsible for publishing CFD application/allocation guidelines and running the CFD allocation process.

4. Plans for the second CFD Allocation Round

We have now published a suite of documents to launch the second CFD Allocation Round which will open on the 3rd of April 2017 including:

A series of statutory notices to officially launch the round as required by secondary legislation.

This includes the Budget Notice and accompanying note to the Budget Notice, which sets out information on budget, strike prices, delivery years and details of the maxima applying to the second CFD Allocation Round. Eligible less established technologies will compete for an annual budget of £290m for the delivery years 2021/22 and 2022/23.

The CFD Standard Terms and Conditions and the Generic, Phased (Single Metering), Phased (Apportioned Metering), Private Network and Unincorporated Joint Ventures front-end Agreements for the second CFD Allocation Round. These documents have been revised since the first CFD Allocation Round following consultations in 2015 and 2016.

The government response to the call for evidence on Geothermal technologies in the CFD which confirms that we are setting the administrative strike price for this technology at £140/MWh. This strike price is included in the Budget Notice.

We have also published the Allocation Framework which sets out the rules under which the second CFD Allocation Round will be governed in line with the Contracts for Difference (Allocation) Regulations 2014. Minor and technical amendments have been made to the draft version which was published on 8 February.

More information for Stakeholders

The Contracts for Difference Strike Price Methodology which explains the underpinning methodology and the objectives for setting the CFD strike prices contained in the Budget Notice.

The consultation on non-mainland GB wind was published on 9 November 2016. This consultation is now closed and we are currently analysing feedback.

The consultation on fuelled and geothermal technologies in the CFD scheme was published on 9 November 2016. The call for evidence is now closed; the government response on geothermal technologies can be found here.

We are currently analysing feedback on the fuelled technologies

The supply chain plan guidance set out details of how projects which are greater than or equal to 300MW can apply for a supply chain plan statement and how such requests are assessed.

6. Key documents relating to the first round (October 2014 to March 2015)

The following section sets out the first round auction results and key documents relating to that round.

6.1 CFD auction results

At 7 am on the 26 February 2015 DECC published the first CFD auction results and statistics. This ensured that the results of the auction were fully transparent and allowed the market to act accordingly. This page sets out a list of successful applicants, their technology and capacity, clearing price and delivery year as well as budgetary impacts.

6.2 The CFD contract

Contracts for Difference: standard terms and conditions, December 2015 update

CFD for private network generation

Electricity Market Reform: development of the Contract for Difference

6.3 CFD budget and allocation

CFD budget notice

Contract for Difference:Final allocation framework for the October 2014 allocation round (October 2014)

Indicative CfD budget notice for the autumn 2014 CfD allocation round

Contract for Difference: allocation process high level process (08 April 2014)

Electricity Market Reform Contracts for Difference: contract and allocation overview

Contract for Difference: allocation methodology for renewable energy

6.4 CFD policy development

A range of documents which have contributed to the development of CFD policy.

Swansea Bay Tidal Lagoon: potential support for the project through the CFD mechanism

Ofgem & Fuel Measuring and Sampling/Sustainability under the CFD

CFDs for non-UK renewable electricity projects

Electricity intensive industries - relief from the indirect costs of renewables

Investing in renewable technologies – CfD contract terms and strike prices

Contract length analysis for Feed-in Tariff with Contracts for Difference (August 2013)

Planning our electric future: technical update