Reconciliations: How does money move through the CfD scheme – resources

Since September 2021, record-breaking energy prices have significantly brought forward the point at which low-carbon generators supported by the Contracts for Difference (CfD) scheme began to make payments, rather than being due to receive them.

This page gathers resources to help clarify the various aspects that interact to determine how much money becomes due to or from energy suppliers and CfD generators.

As 2022 has progressed, we have continued to see the CfD mechanism working as intended, with high market prices resulting in payments from CfD generators to LCCC. However, while energy suppliers are invoiced daily when LCCC needs to pay generators, the reverse flow only happens at quarterly reconciliation points. Regulations do not allow LCCC to set a negative Interim Levy Rate (ILR), which has been set at zero since September 2021. For more detail on this process, please refer to the presentation at the bottom of this page.

Numbers

LCCC’s In-period Tracking dashboard compares forecast CfD payments against the realised values for the current quarter, providing an estimate of the reconciliation payment to be made to electricity suppliers.

Greater detail still can be accessed via the datasets available for download in LCCC’s Data Portal. However, as discussed in LCCC's latest blog, Show me the Money (link below), the actual amounts are likely to vary significantly from initial forecasts.

Quarterly updates on the Interim Levy Rate (ILR) and Total Reserve Amount (TRA) are emailed directly to relevant contact lists and published to our Announcements page.

Explanations

Since 2021, we have published a series of updates and explanatory pieces outlining the latest movements in the CfD scheme. Links to each piece are below, with all blogs available on LCCC's Blogs and Insights page.

For further detail on the timings involved in calculating the ILR and TRA forecasts and how these fit into the quarterly reconciliation process, please refer to the below presentation. Please note, whilst this presentation was delivered as part of our Q3 2022 ILR and TRA webinar on 28 April 2022, the process is comparable across quarters.