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 359 CfD contracts and with annual auction rounds, 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.
How do generators gain a CfD?
Low-carbon electricity generators secure CfD contracts through a competitive auction and must meet key milestones to retain their right to payments. These milestones demonstrate commitment to the project and progress towards commissioning.
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 Supplier Obligation Levy
Electricity suppliers fund the CfD scheme through the Supplier Obligation Levy, which we set in advance based on expected quarterly payments. We also collect a Reserve Amount, based on assumed levels of electricity generation. If these assumptions change due to unforeseen events, we may reduce the Levy and Total Reserve Amount during or before a quarter. All assumptions are published in our levy dashboards.
CfD project growth
The CfD project growth map shows where CfD projects are located across the UK and the renewable technologies they support, highlighting their role in the transition to clean energy.
The 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.
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.
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FAQs
View all frequently asked questions and our responses for our schemes and other resources.
