The Contracts for Difference (CfD) scheme is the government’s main mechanism for supporting low-carbon electricity generation.
CfDs incentivise investment in renewable energy by providing developers of projects with high upfront costs and long lifetimes with direct protection from volatile wholesale prices, and they protect consumers from paying increased support costs when electricity prices are high.
Renewable generators located in the UK that meet the eligibility requirements can apply for a CfD by submitting what is a form of ‘sealed bid’.
There have been 3 auctions, or allocation rounds, to date, which have seen a range of different renewable technologies competing directly against each other for a contract.
Successful developers of renewable projects enter into a private law contract with the Low Carbon Contracts Company (LCCC), a government-owned company.
Developers are paid a flat (indexed) rate for the electricity they produce over a 15-year period; 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).
The Low Carbon Contracts Company (LCCC) is a private company owned by BEIS.
The LCCC is counterparty to the contracts awarded in CfD allocation rounds (auctions) and its primary role is to issue the contracts, manage them during the construction and delivery phase and make CfD payments.
National Grid is the Delivery Body for the CfD scheme, responsible for running the CfD allocation process.
Ofgem is responsible for hearing certain appeals.
The third CfD allocation round (AR3)
The third CfD allocation round page sets out AR3 auction results and key documents.
AR3 ran from May to September 2019.
The second CfD allocation round (AR2)
The second CfD allocation round page sets out AR2 auction results and key documents.
AR2 ran from March to September 2017.
The first CfD allocation round (AR1)
The first CfD allocation round page sets out AR1 auction results and key documents.
AR1 ran from October 2014 to March 2015.