Electricity Market Reform: Contracts for Difference
One of the key mechanisms to the EMR is the Contract for Difference (CFD) for renewable energy. 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. 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.
More information is available on the Implementing Electricity Market Reform (EMR) page and the Electricity Market Reform page which contains the documents published by the government describing the framework underpinning the development of the generic CFD.
Electricity Market Reform: Contracts for Difference Frequently Asked Questions
These FAQs are for information only and do not supersede or replace the requirements contained in The Contracts for Difference (Allocation) Regulations 2014, The Contracts for Difference (Definitions of Eligible Generator) Regulations 2014 and Final Allocation Framework for the October 2014 Allocation Round.
These FAQs do not constitute legal or investment advice and prospects are urged to consult their professional advisors. It is our intention to keep these FAQs under review and to publish revised issues from time-to-time.
Update to the Final Allocation Framework and Framework Revision Notice
This document is a Framework Revision Notice together with an Updated Final Allocation Framework for the October 2014 allocation round, which opens for application on 16 October 2014 as is identified in the Allocation Round Variation Notice.
This is an update to the Final Allocation Framework published on 1 September 2014 and the 5 discrete and minor changes to the 1 September document are identified in the Framework Revision Notice.
CFD Allocation Round Variation Notice
Due to changes to the date on which the Budget Notice is to be issued it is necessary to amend the commencement date and application closing date to ensure that there is sufficient time between the Budget Notice being issued and the commencement date, and between the commencement date and the application closing date as required under the Allocation Regulations. We have also amended the end date of the round to the maximum period of 6 months permitted under the Allocation Regulations as a result of these other changes.
Contracts for Difference Auction Guidance Document
This document serves as a supporting document to the Allocation Framework and Allocation Regulations, in order to assist CFD applicants in their understanding of the constrained allocation and auction process.
The Contracts for Difference (Allocation) Regulations 2014 - Allocation Round Notice
A notice announcing the dates of the first CFD Allocation Round, including the period during which applications may be made. Generators who wish to participate in the first Allocation Round will be able to apply for a CFD Contract from 14 October. All applications must be submitted to National Grid by 27 October 2014 at the latest.
This announcement also enables developers to begin applying for necessary modifications of the Standard Terms and Conditions that are of minor effect, should these be needed. Any Generators wishing to request a modification will need to register an account with the Low Carbon Contracts Company, the Counterparty for CFD Contracts, to obtain the Minor & Necessary Change Request forms. Please email email@example.com for more information on this process.
The latest point for submitting such requests is 29 September 2014. The outcome of any requests will be made available to applicants by 20 October 2014.
The Contracts for Difference (Standard Terms) Regulations 2014 - CFD Standard Terms Notice
A notice issued by the Secretary of State, informing the CFD Counterparty:
* Which Standard Terms and Condition should be issued in the Allocation Round; and
* How the CFD Agreement should be completed.
This contains the detailed non-project specific information required in order to complete the CFD Agreement.
Contract for Difference: Final Allocation Framework for the October 2014 Allocation Round (01 September 2014)
The Secretary of State has now confirmed that the first allocation round for Contracts for Difference will commence on 14 October 2014. In accordance with the provisions of the Allocation Regulations, the Secretary of State has issued a Framework Notice together with the final Allocation Framework for the October 2014 allocation round.
The Allocation Regulations set out the eligibility requirements an applicant must satisfy in order to be eligible for a CFD. The Allocation Framework sets out some supplementary qualification criteria applicable to private network generators at rule 4 (policy in respect of which was confirmed in the publication) and for phased offshore wind generators at rule 5; it contains the allocation process which applies to an allocation round from rule 9; the valuation formula to be used by the delivery body to value applications against available budgets at schedule 2 and details of the evidence that the delivery body will be required to assess when carrying out eligibility checks at schedule 4.
We have published the final Allocation Framework to allow industry time to consider it in advance of the Allocation Round commencement date of 14 October 2014. A plain English guide to the auction will be published by DECC shortly.
The Contracts for Difference (Standard Terms) Regulations 2014 - CFD Counterparty Cost Notice
A notice issued by the Secretary of State informing the Low Carbon Contracts of a maximum cost amount. Any proposed modifications to the Standard Terms and Conditions that are assessed to increase the cost to Low Carbon Contracts Company above this amount shall not be considered minor in accordance with Regulations.
CFD for Private Network Generators Government response to issues raised by industry
Government’s response to issues raised by industry, in response to the publication on 16 June of the CFD for Private Network Generators: Policy Overview.
CFD for Private Network Generation policy overview document (16 June 2014)
DECC has published a CFD for Private Network Generation policy overview document. Accompanying the overview document is a draft Private Network CFD Agreement, Metering Operational Framework and Technical System Requirements.
These documents have been developed in partnership with industry and, together, provide the contractual and operational framework for Private Network Generators awarded a CfD.
Stakeholders are invited to provide comments on the policy overview and its annexes. Comments should be sent to firstname.lastname@example.org by midnight on Friday, 4 July 2014.
Contracts for Difference (23 April 2014)
Subject to the will of Parliament and the finalisation of provision for Sustainability, Phased Projects and Private Wire Network Generation, the Contract for Difference (‘CfD’) published today represent the terms that will be offered by the CfD Counterparty Company Ltd (the ‘CfD Counterparty’) to Generators following successful allocation for CfD projects in Great Britain.
The CfD is the culmination of several successive cycles of drafting and engagement with industry and the wider public, beginning in May 2012 and concluding in January 2014. The CfD now includes additional provisions that seek to ensure it is flexible, investable and remains robust throughout its life. We will continue to work with industry and interested parties on the development of the outstanding areas of the CfD.
Contracts for Difference (19 December 2013)
Contracts for Difference stimulate investment in low-carbon technologies (including renewables, nuclear and Carbon Capture and Storage (CCS)) by providing greater certainty of revenue that will encourage investment by reducing risks to investors and by making it easier and cheaper to secure finance.
The documents published today, 19 December, provide complementary information to the Electricity Market Reform (EMR) Delivery Plan published 19 December and the Electricity Market Reform Strike Prices and Contract Terms published on 4 December 2013. They set out a revised draft of the CfD and explain the changes that we have made since the previous draft was published in August.
Government has engaged extensively with a range of stakeholders on the development and implementation of its policy approach in developing the CfD. This policy will now be implemented through the CfD as set out in the December Draft.
We are aware that in respect of certain clauses that some stakeholders have had limited opportunity to comment on full-form drafting. Therefore stakeholders are invited to provide comments on how the policy has been given effect in the detailed drafting of the following clauses, by 27 January 2014:
BSUoS and TLM costs;
adjustments for Generation Taxes;
Qualifying Shutdown Events;
Fuel Measurement and Sampling Procedures
Market Reference Price
We are also seeking comments on our policy for Phasing.
Comments should be sent to email@example.com and be submitted using the template set out in the
Published in August 2013
In this we highlighted the significant policy changes to the approach in the November Operational framework and CfD Heads of Terms, many of which were informed by engagement with industry and other stakeholders.
This is a draft contract spine of a CfD published in August 2013. It is superseded by the revised draft published in December 2013.
The key elements of the detailed allocation process and provided information on its implementation.
This paper reports on the summary conclusions of analysis conducted by DECC to answer the questions:
How does the break even Feed-in Tariff with Contracts for Difference (CfD) strike price change with the contract length of the CfD for renewable generating technologies?
Which contract length gives the lowest net present value of support payments to generators?
Ways to respond:
EMR CfD Design and Implementation Team
Department of Energy & Climate Change