What is a Contract for Difference (CfD)?
The CfD is a long-term contract between us and a low carbon electricity generator. We now manage 363 CfD contracts and with annual auctions round, the CfD portfolio will continue to grow.
The CfD provides the generator with a guaranteed price per MWH of electricity generated. It is designed so that generators are paid when this 'guaranteed price' (strike price) is higher than the price of electricity on the market (market reference price). If this is reversed and the market price of electricity is higher, generators make payments back to suppliers and therefore consumers.
Benefits for Low Carbon Generators: The scheme protects generators against exposure to market price volatility.
Benefits for Consumers: Consumers are protected from high electricity costs as generators pay money back to suppliers if the price is higher than the agreed price.
Benefits for Investors: The CfD contract provides a guaranteed fixed price for the electricity produced over the course of the contract, providing certainty on returns and therefore reducing the financing cost of the project.
This is shown in the diagram below.
CfD Supplier Obligation Levy
Electricity suppliers are required to fund the CfD scheme. They do this through the CfD Supplier Obligation Levy. We determine in advance what amount a supplier will need to pay in each quarter, and set the Levy accordingly. We are also required to collect a Reserve Amount from each electricity supplier, and this, like the Levy, is based on assumed levels of electricity generation. If assumptions change due to unforeseen events, we can reduce the Levy and the Total Reserve Amount, before or during a quarter. We publish all our quarterly assumptions in the levy dashboards.
Data Portal
Our Data Portal has been developed to support the Open Data initiative by DESNZ (The Department of Energy Security and Net Zero) and Ofgem (Office of Gas & Electricity Markets) We are keen to ensure our stakeholders can easily download data that we publish on their scheme dashboards. More datasets will be published in the future in a phased approach. The CfD Datasets can be viewed here
How do generators gain CfD contracts?
Low-carbon electricity generators gain CfD contracts through a competitive auction, after which they have a number of milestones to meet, to preserve the term for payments, which is typically 15 years. These include proving their commitment to the project within 12 months of signing the contract, and commissioning 80% of the initial capacity estimate within the target commissioning window.
Milestones at a glance:
15 YEARS
to preserve the term for payments.
12 MONTHS
to prove their commitment to the project upon signing the contract.
80%
commissioned of the initial capacity estimate within the target commissioning window.
CfD project growth
The CfD Project Growth Map provides a comprehensive overview of the UK's Contracts for Difference (CfD) projects. This interactive tool allows you to explore the number of projects in each location, the types of renewable technologies used, and the overall impact on the UK's clean energy landscape. Whether you're an industry professional, policymaker, or sustainability advocate, this map offers valuable insights into the nation's transition to green energy.
The Contracts for Difference (CfD) Schemes Register is a comprehensive database providing details on all CfD-supported projects across the UK. It includes key information such as project locations, technologies deployed, contract specifics, and operational status.