Payments are based on Metered Output from the Facility and are made based on the difference between the Market Reference Price and the Strike Price. When the Strike Price is higher than the Market Reference Price payments are made from Low Carbon Contracts Ltd (“LCCC”) to the Generators and when the Market Reference Price is higher than the Strike Price Generators pay the difference to LCCC.
This section covers three areas:
Billing and Payments
The Billing Period specified in the contract is 24 hours. Low Carbon Contracts Company Ltd must issue Billing Statements to Generators no later than 7 Business Days after the end of the Billing Period that the Billing Statement covers.
The Billing Statement includes (among other things) identification information, information needed to calculate the daily payment amounts (including any Reconciliation Amounts and Compensatory Interest Amounts). The full content that has to be included on the Billing Statement is specified in the CFD contract.
The CFD contract holds provision for payment calculation for both Baseload Technologies and Intermittent Technologies. For both types, the calculation of payments is a function of:
- the amount of electricity exported from the Facility, the renewable qualifying multiplier (if applicable) and the CHP qualifying multiplier (if applicable). The calculation uses the lowest of the Loss Adjusted Metered Output and the Maximum Contract Capacity, and
- the difference between the Market Reference Price and the Strike Price. The Market Reference Price is either the Baseload Market Reference Price or Intermitted Market Reference Price, as applicable. You can find further information about the Market Reference Price below.
The payments under the CFD contract are made based on the difference between the Strike Price and the Market Reference Price. When the Strike Price is higher than the Market Reference Price, payments are made from Low Carbon Contracts Company Ltd (“LCCC”) to the Generators and when the Market Reference Price is higher than the Strike Price, Generators pay the difference to LCCC. There are two Market Reference Prices in the CFD contract - the Baseload Market Reference price and the Intermitted Market Reference Price. The CFD contract specifies which Market Reference Price applies.
Baseload Market Reference Price
The Baseload Market Reference Price (BMRP) is calculated on a seasonal basis pursuant to condition 15 of the Contract for Difference Standard Terms and Conditions. Baseload prices are calculated using a traded volume weighted average based on forward season data received from LEBA. The BMRP is published in April and October of each year. To view please follow this link.
Intermittent Market Reference Price
The Intermittent Market Reference Price (IMRP) is the GB Day Ahead Hourly Price published by the Intermittent Day Ahead Indices. The CFD contract sets out a calculation of the IMRP to be used where the Intermitent Day Ahead Indices publish different prices for the day ahead or if there is a lack of a day ahead price.
The CfD contract provides for certain annual adjustments to be made to the Strike Price including a CPI-linked adjustment which is applicable to all Generators, and adjustments based on balancing system charges and transmission losses which are only applicable to certain Generators. Whether or not it applies is set out in the Generator’s CFD Agreement.
These adjustments are designed to make the CfD contract broadly long-term neutral to changes in balancing system charges, transmission losses charges and inflation, which are outside of the Generators’ control. Other adjustments are possible and Generators should refer to the CFD contract for more information on these. LCCC has released guidance on Strike Price Adjustments available here.
Once per year on the Indexation Anniversary (being the first day of the Summer Season, which is 1st of April) the Strike Price must be adjusted to account for inflation. It is a requirement that this annual Indexation Adjustment must be notified to the Generator no later than 5 Business Days after each Indexation Anniversary. We use the CPI published each month by the Office for National Statistics for the indexation.
Balancing System Charge
Where applicable, Strike Prices are adjusted to take into account changes in Balancing System Charges made to the generator. There are three steps to calculating the relevant
Strike Price adjustment on the basis of the Balancing System Charge:
- calculation of the Indexed Initial Balancing System Charge;
- calculation of the difference between Actual Balancing System Charge and the Indexed Initial Balancing System Charge;
- calculation of the Balancing System Charge Strike Price Adjustment.
TLM(D) or transmission loss multiplier for delivered volume, is used to calculate the electricity volumes to credit a Generator under the Balancing and System Code (BSC), in each settlement period. Where applicable, Strike Prices are adjusted to give effect to changes in TLM(D). Since Generators are paid on the basis of their BSC volumes, making (lagged) corrections for changes in TLM(D) provides the Generator with greater certainty of its income.
It is specified in the CfD Agreement if BSC and TLM(D) charges apply to the CFD contract. They will not apply if your project is licence exempt.